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When your flat isn't quite full and you're considering renting out a room or two, beware! Know the rules to avoid suspicions of tax evasion.
With the rise of platforms like Airbnb, Wimdu, and 9Flats, subletting a spare room or an entire apartment has become more appealing. However, to keep the tax authorities at bay, it's essential to understand the tax regulations on rental income from subletting your property. The German Federal Association of Tax Assistance Associations (BVL) advises caution.
Rental Income Above €520 is Taxable
Fortunately, if you only occasionally rent out a space and make less than €520 annually, there's no need to fret. These earnings go untaxed. Keep records though, just in case the authorities ask for them later. On the flip side, if your rental income tops €520 per year, it should be declared in your tax return—or risk facing the taxman's wrath.
Permanent renters, earning more than €410, need to declare their business in their tax return when their income, after deducting expenses, exceeds €410.
Aiming for Income? It's Fair Game for Taxes
The tax authorities may demand their cut if you have an "intent to generate income." This term refers to the surplus you create from renting. For example, if you charge more in rent than your expenses (like rent, utilities, and maintenance), you're creating a surplus and will be taxed.
Calculating your expenses becomes trickier when you're also living in the apartment you're subletting. In this case, allocate costs proportionally, focusing on the percentage of the living space the rented room occupies. If more than one person uses a common area like the bathroom, divide that cost proportionally by the number of users.
Watch Out for Tax Evasion Suspicion
The tax office closely watches those who rent out living spaces frequently, and it's likely they'll one day find out. Sometimes, platforms like Airbnb collaborate with tax authorities to uncover suspected tax dodgers. Operators of such platforms are required to report users conducting 30 or more rentals in a year or generating €2000 in income through the platform.
Stay on the right side of the law, declare your rental income, and show the taxman both your warmth and your receipts.
[1] German Rental Law (Wohnraummietverträge) - Source: b vetter pdf.de[2] Mieterschutzgesetz (MSchG) - Source: gesetze-im-internet.de[3] Tax Return Form (Form 18) - Source: finanzagentur.de[4] Taxfix - Source: taxfix.com[5] Renting out non-German properties - Source: expats.de[6] Tax implications of short-term rentals - Source: padelavan.com[7] Consulting a tax advisor - Source: fachanwalt.de
In light of the community policy regarding rental income, it's crucial to be aware that if your earnings from subletting a property exceed €520 annually, the income becomes taxable. To avoid any suspicion of tax evasion, it's recommended to seek professional advice for personal-finance matters in declaring this income. Furthermore, if you aim to generate substantial income through subletting, be prepared to report it in your tax return to avoid potential issues with the tax authorities.
