Holiday properties and tax

From correct deduction to capital gain

Your own holiday home by the sea or in the mountains and save on taxes at the same time? Properly financed and rented out, a holiday home can really offer both. As a landlord, you have to pay tax on your rental income with your other income, but in return you can also deduct investments in your holiday property for tax purposes. This is important:

Holiday property as a tax-saving model?

If the investment costs in the first few years are higher than the rental income, high earners in particular can use the losses from a holiday property to reduce their tax liability. But beware, if the holiday home costs more than it earns for too long, things can get dicey at the tax office.

Crucial point "hobby" for holiday properties

If, in addition to the low rental income and high investment costs, you are also holidaying in your holiday property yourself, the tax office could deny you the tax benefits or even demand an additional payment. This intention to generate income is a popular point of contention between holiday home owners and the tax office.

How to prove your intention to let to the tax office

Management contract that excludes owner occupation
Written agreements with the local tourist office
Contract with a tour operator
Own homepage for the holiday property
Proof of marketing activities, e.g. newspaper adverts, online portals, etc.

Expert tip:
"If your holiday home is empty from time to time, this is not a problem for the tax office. The only thing that counts here is that you make your holiday home available for rent without restrictions and over a longer period of the year."

Forecast for 30 years for partial owner-occupation

If you still want to use your holiday property yourself from time to time, you must provide the tax office with a forecast of rental income over the next 30 years. This is the only way you can prove to the tax office that you intend to realise taxable rental profits despite occasional owner-occupation.

Deducting income-related expenses for holiday properties

If you rent out your holiday property and thus generate taxable income, you can also deduct income-related expenses from your tax bill. These include

Operating costs (heating, electricity, water, WLAN, rubbish collection, administration costs, property tax, caretaker services, etc.)
Maintenance costs (garden maintenance, regular cosmetic repairs, replacement of furniture, etc.)
Marketing costs (fees for holiday property portals on the web, flyers, newspaper adverts, etc.)
Depreciation for wear and tear (AfA). This allows you to write off investments costing more than 800 euros against tax evenly spread over a longer period of time.

Expert tip:
"Important: You cannot claim any income-related expenses on any days when you use your holiday home yourself. That's why it's best to work out with your tax advisor exactly how often you can use your holiday home yourself without jeopardising the tax advantage."

Capital gains on holiday property

Even if you sell your holiday home or holiday flat at some point, taxes may still be incurred. If you bought your holiday property less than ten years ago, you must pay attention to speculation tax. Exception: You have used the holiday property exclusively for your own residential purposes - however, this is usually the exception for a holiday property, but rather applies to your main residence.

Expert tip:
"Capital gains are always taxable abroad, regardless of a speculation period. This capital gain may also be subject to income tax in Germany."

Property transfer tax for holiday properties

Land transfer tax is also payable on the purchase of a holiday property. It varies from state to state in Germany. Schleswig-Holstein, Brandenburg and Saarland are the frontrunners with a current rate of 6.5%. Bavaria and Saxony, on the other hand, only charge 3.5% property transfer tax.