Can I also use my property for commercial purposes and how will it be taxed?
September 5, 2023 | 50,00 EUR | answered by Tina Ullmann
Dear tax advisor for property taxation,
My name is Bernd Friedendahl and I own a property that I have only used privately so far. Now I am considering whether I could also use the property for commercial purposes to generate additional income. However, I am unsure about how a commercial use of the property is treated for tax purposes and what impact it could have on me.
The property is located in a good area and in my opinion would be well-suited for commercial use. I already have ideas on how I could use the property commercially, but before taking further steps, I would like to inform myself about the tax aspects.
My concern is that a commercial use of the property could lead to a higher tax burden that I may not be able to handle. Therefore, I would like to know how a commercial use of the property is taxed and if there are ways to save taxes or take advantage of tax incentives.
Can you explain to me how a commercial use of my property is taxed? Are there any special regulations or tax benefits that I could take advantage of? What risks and opportunities come with a commercial use and how can I best prepare for them?
Thank you in advance for your support.
Kind regards,
Bernd Friedendahl
Dear Mr. Friedendahl,
Thank you for your inquiry regarding the tax treatment of commercial use of your property. I will gladly explain in detail how commercial use is taxed and what opportunities there are to save taxes or take advantage of tax benefits.
In general, a property used for commercial purposes is taxed differently than a property used exclusively for private purposes. In the case of commercial use, the income from renting or leasing the property is treated as income from a business operation and is subject to trade tax as well as income tax.
Trade tax is a municipal tax levied on businesses and trades on their profits. The amount of trade tax depends on the trade profit determined from the company's profit and loss statement. However, there is a tax-free allowance of 24,500 euros for individuals, which can provide some relief.
In addition to trade tax, you also have to pay income tax on the profits from the commercial use of your property. This is calculated based on your personal income tax rate and can vary depending on the amount of income. There are also opportunities here to take advantage of tax benefits, such as depreciation on the acquisition and production costs of the property.
It is important to note that commercial use of your property can also involve certain risks. For example, there may be higher ongoing costs for maintenance, upkeep, and insurance. Additionally, as a landlord, you may have to deal with rent arrears or problem tenants.
To prepare optimally for commercial use of your property, I recommend seeking thorough advice and conducting a detailed calculation of expected income and expenses. A tax advisor can help you identify tax optimization opportunities and support you in fulfilling your tax obligations.
Overall, commercial use of your property can be lucrative, but it is important to inform yourself about the tax aspects beforehand and seek professional advice. I am happy to answer any further questions you may have and support you in your endeavor.
Best regards,
Tina Ullmann
Tax advisor for property taxation
