What do I need to know about renting out a holiday flat?
What do I need to know about renting out a holiday home?
If you wish to claim tax deductions for a holiday home, you must meet the strict requirements of the tax office. The central point is the intention to make a profit: The tax office only recognises advertising costs if the property is predominantly used for rental. Find out what you need to consider to claim your holiday property for tax purposes and why "hobby" could be a problem here.
Requirements for tax deduction
To deduct expenses for a holiday home as advertising costs, you must prove that the property is predominantly rented out. The easiest way to do this is to completely exclude self-use. An estate agent contract confirming exclusive rental throughout the year makes it easier to provide proof.
If the holiday home is only partially rented out, the rental rate must be at least 75% of the local rental period (BFH ruling, Ref: IX R 57/02). If this value is not reached, the tax office requires a profit forecast over 30 years showing a surplus from the rental (BFH ruling, Ref: IX R 97/00). This forecast is also required if the holiday property is partially used by the owner.
Hobby: What does it mean?
If you cannot convincingly demonstrate the intention to make a profit to the tax office, the rental will be classified as a hobby. In this case, no advertising costs can be deducted. A hobby exists if the main purpose of use is not rental for profit, but private use. If the profit forecast is negative, you do not have to pay tax on the rental income, but you also cannot claim any costs for tax purposes.
Vacancy and rental periods
Periods of vacancy can also be taken into account for tax purposes, provided they are clearly attributed to rental. In the case of partial private use, the vacancy is divided proportionally according to the rental and own use ratio.
A helpful ruling by the Federal Fiscal Court (BFH, Ref: IX R 33/19) states that when calculating the local rental period, only holiday homes may be used as a benchmark, which can make tax recognition easier.
Intention to make a profit with multiple properties
If you own several holiday homes, you must prove the intention to make a profit for each individual property according to the BFH ruling (Ref: IX R 37/17). This is particularly important if the use changes, for example between long-term rental and holiday rental.
Business tax and holiday homes
If the rental of your holiday home is run like a hotel business – for example, with frequent guest changes or the offering of additional services such as cleaning or breakfast – the tax office may classify the income as commercial activity. This could lead to the payment of business tax and make the sale of the property taxable even after the ten-year speculation period (EStH H 15.7 (2) to § 15 EStG).
However, the Federal Fiscal Court (BFH, Ref: IV R 10/18) has ruled that commissioning a commercial agent does not automatically lead to a commercial activity by the landlord, as long as there is no own economic interest in hotel-like rental.
Conclusion
The intention to make a profit is crucial for claiming your holiday property for tax purposes. If this is missing or private use predominates, the tax office will classify the rental as hobby. Ensure compliance with local rental periods and provide a positive profit forecast to secure tax benefits.
