How does renting commercial space affect my income tax?
February 23, 2022 | 50,00 EUR | answered by Lucas Krebs
Dear tax advisor,
My name is Marco Hofstetter and I have been renting out commercial spaces in my possession for several years. So far, I have not delved deeply into the tax implications of this activity and am now somewhat concerned that I may be overlooking tax advantages or disadvantages.
Currently, I rent out three commercial spaces to different companies and generate regular income from this. I am not sure how these rental income will affect my income tax and if I can claim certain expenses for tax purposes. Additionally, I wonder if as a landlord, I could fall into certain tax pitfalls that I am not aware of yet.
My concerns mainly revolve around the possibility of having to pay back taxes or missing out on unused tax benefits. I would therefore like to learn from you how I can optimally structure my rental of commercial spaces for tax purposes, in order to avoid any unpleasant surprises.
Can you explain to me what tax aspects I need to consider as a landlord of commercial spaces? Are there specific expenses that I can deduct for tax purposes? And what possible tax disadvantages could I face if I do certain things wrong?
I look forward to your expert advice and thank you in advance for your support.
Best regards,
Marco Hofstetter
Dear Mr. Hofstetter,
Thank you for your inquiry regarding the tax aspects of renting commercial spaces. I would like to explain to you in detail what you as a landlord should pay attention to in order to be optimally positioned for taxes and to take advantage of possible tax benefits.
First of all, it is important to know that income from renting commercial spaces is generally considered income from renting and leasing (§ 21 EStG). This income must be reported in your income tax return. These are your gross income, from which you can deduct certain costs to determine your taxable income.
Deductible costs include ongoing operating expenses, such as property tax, building insurance, management costs, repairs, and maintenance costs. Depreciation on the building and equipment can also be claimed for tax purposes. It is important that you document all relevant costs and keep receipts in order to report them in your tax return.
Furthermore, as a landlord, you should keep an eye on value-added tax. If you charge VAT on your rental income, you must remit it to the tax office. However, you also have the option to opt for the small business regulation and waive the collection of VAT.
Another important point is the question of possible tax disadvantages. Here, the so-called "Fictitious Capital Gain Taxation" should be taken into account. If you sell your commercial spaces, you may generate a taxable capital gain. To counteract this, you should inform yourself in advance about possible tax planning options.
In summary, it is important to document all relevant costs in order to optimize your tax situation. It is advisable to consult with a tax advisor early on to take advantage of possible tax benefits and avoid tax traps.
I hope that this information has been helpful to you and I am available for any further questions.
Sincerely,
Lucas Krebs
