Field help:
... rented out to family members?
Indicate whether you have rented part of the property or all the property to relatives free of charge.
The tax office examines renting to relatives in detail.
Previously applied: If the rental income is at least 66% of the local rent (incl. allocations), the transfer is fully paid and the income-related expenses are generally recognised in full by the tax office.
If, on the other hand, the actual rent is less than 66% of the usual local rent, this is considered to be a discounted or partially discounted transfer. In this case, the tax office only recognises the income-related expenses on a proportional basis, i.e. in the ratio between the actual rent and the standard local rent.
As of 1 January 2021, there is an important change:
- If the agreed rent is at least 66% of the local market rent, the expenses are fully deductible as income-related expenses.
- If the agreed rent is between 50% and 66% of the market rent, the intention to generate income must be examined and an income prediction is required for this purpose:
- If the income prediction is positive, the income-related expenses are fully deductible.
- If the income prediction is negative, the income-related expenses are to be divided and only deductible proportionally.
- If the agreed rent is less than 50% of the local market rent, the transfer of use is to be divided into a paid and a free part. The expenses are only deductible as income-related expenses in proportion to the paid part.
Important: If the rent is at least 50 percent but less than 66 percent of the local rent, a total profit prediction test (Totalüberschussprognoseprüfung) must be carried out:
If this examination of the total profit prediction is positive, the intention to generate income is to be assumed with respect to the discounted renting of the living space and the full deduction of income-related expenses is possible.
If, on the other hand, the total profit prediction test leads to a negative result, an intention to earn income is only to be considered for the part which is rented out for payment. The income-related expenses may be deducted proportionately for the part rented out for payment.
The total profit prediction test for income from renting and leasing is carried out according to long-standing and consolidated Federal Fiscal Court (Bundesfinanzhof, BFH) case law. The Federal Ministry of Finance (BMF) letter of 8 October 2004 (BStBl 2004 I p. 933) is still relevant.
