Reclaiming tax on repairs to listed buildings

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We are looking at buying a house in the Lüneburger Heide and it stands under Denkmalshutz with the Gemeinde. (Like a listed building in Britain). The house needs a lot doing to it, but we have heard that you can reclaim a portion of this money through taxes!

 

We have looked up a hundred and one pages on this subject and are still confused! My boyfriend is German so its not that we dont understand the lingo, just the tax lingo.

 

Is there anyone out there that has already had experience with this, or is a very clever tax man? Please, we need help to work this out.

 

Thanx in advance :blink:

 

Amyy

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Run.. Run fast...

 

Forget you even saw the place.. The denkmalschultz rules/laws can be very strict and restraining.

The money you get back is but a pittance of the overall amount you will need to fix the place up.

 

On top of that any work, must be approved by the local DMS protection group/building code Dept.

You can only use DMS approved contractors and approved materials.. Your choices of materiel

and installation methods will be very restricted and often time very expensive.

 

There's a reason most people avoid these places like the plague..

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In a single sentence it works like this: To encourage people to invest in old buildings you can offset a large amount of the expenses you incur renovating a Denkmalschutz building against your income tax liability, ie. you can subtract these expenses from your income before tax is applied, thus saving tax.

 

In more sentences: You need professional advice before starting this to know exactly what expenses you can claim and be careful as this is an area (like rental flats in the Berlin area) that is littered with dodgy and often criminally deceptive 'advisors'. This is especially true if such an advisor has suggested this as a good way to invest your savings and you intend to rent the house out. I can't overstate the need to be extremely cautious and suspicious of such advice.

 

Post some of your favourite links and maybe someone can help you more.

 

Edit: I wouldn't necessarily go with DK's advice - if you have the money and like the building then perhaps it makes sense to you for your primary residence but as an investment, especially a rental investment, it is unlikely to ever make you rich and certainly not quickly.

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Although I agree with Helles' edited final summary, count me in the DK brigade - running rapidly in the other direction.

 

If you are still considering it after these warnings, remember that listed building is not equal to listed building. In some cases only a part of the house is protected, like say the outside appearance. Sometimes it can even be something relatively minor like an exotic staircase or fireplace - in this case you might be able to live with it.

 

At the other end of the scale there are buildings where you can't change anything and any renovation has to be done using authentic original materials and techniques - that's where it gets really expensive! That's also where you'll find that the Denkmalschutz people are living in your pockets - and believe me, it's not a nice situation to be in!

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What you can do, depends on if you plan to live in it or rent it to someone else. If you live in it you can deduct 9% of your repair costs like "Sonderausgaben" every year for 10 years. So in the end you have deducted 90% of your costs. §10f EStG

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If you live in it you can deduct 9% of your repair costs like "Sonderausgaben" every year for 10 years. So in the end you have deducted 90% of your costs. §10f EStG

I'm sorry, but by that math, if it costs me 1k eur per year in maint. costs then I'd only get back 90 Eur.. 90 EURO FROM 1000..

This is not of any help.. Considering that the maint ona any given DMS building will be over 2-3k eur per year you would only

get back 90 Eur for every 1000 spent.. Do the math..

 

And what happens after 10 years if you decide to stay for some odd reason.. Oh well you will be out those maint. fees.

So after 10 years it will cost you even more..

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You get 9% of your total RENOVATION costs every year for 10 years, not repair costs. I'm under in a sanierungs gebiet and about half the cost of my loft was rennovation costs, so I get to deduct 10% per year for 10 years, or the total.

 

It's very worth it in my case. Ask your tax adviser, not an internet forum.

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9% is something but its still a pittance compared to the total costs..

 

 

I get to deduct 10% per year for 10 years

No you didn't, it was only 9% (Per your above comment)

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@DK: If you spent 100.000 EUR for renovation in the first year, you will deduct 9000 in the first year, 9000 in the second, and so on; in the tenth year you will have deducted 90.000 EUR = 90%

 

 

You get 9% of your total RENOVATION costs every year for 10 years, not repair costs.

This is what the law says:

 

 

(1) Der Steuerpflichtige kann Aufwendungen an einem eigenen Gebäude im Kalenderjahr des Abschlusses der Baumaßnahme und in den neun folgenden Kalenderjahren jeweils bis zu 9 Prozent wie Sonderausgaben abziehen...

 

(2) Der Steuerpflichtige kann Erhaltungsaufwand, der an einem eigenen Gebäude entsteht und nicht zu den Betriebsausgaben oder Werbungskosten gehört, im Kalenderjahr des Abschlusses der Maßnahme und in den neun folgenden Kalenderjahren jeweils bis zu 9 Prozent wie Sonderausgaben abziehen...

So I guess it´s both, renovation and maintenance.

 

 

Ask your tax adviser, not an internet forum.

Agreed.

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Just a quick update for you...

 

We walked slowly and sadly away!

 

Too expensive. :(

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Sorry for dragging up an old thread, but we're in a similar situation now, and although my wife is German, it's an apparently complex area even for a native speaker.

 

According to our casual research you are entitled to set 100% of renovations against your income tax bill over a 12 year period. Over 8 years it's 9% per year. Over 4 years it's 7% per year. As we understand it, that means that you can do fairly well if you are prepared to stay the full 12 years,

 

Of course, this is bearing in mind the potential restrictions imposed by the Denkmalamt. In our case, due to everyone being on holiday, we haven't been able to find out the level of protection on this building. In fact, the owner and mayor of the village didn't even know it was protected. We found out last Friday after calling the STEG.de people, as there is potential funding available through a Dorfsanierung programme, and they said it's on the list!

 

My only question is whether these tax breaks are applicable to people with such a house as their primary (read only) residence? I've had conflicting information that said it only applies to those investing in the property and renting it out.

 

Just looking for quick info and will definitely be talking to a tax advisor once we get past the Denkmalschutz questions :)

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I am not tax specialist but from what I understand you only get the tax you paid on the amount.

 

So, being able to put the entire renovations cost against tax will result in you getting the tax back on that sum, not the actual sum back.

 

If it costs 100,000 you will get to claim 10,000 per year against tax. You will lower your tax liability for the next 10 years but you will not get that 100,000 back.

 

Tax advisor is the best way to go.

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Yeah, that was my understanding. We wouldn't be getting the full investment back, but it'd at least mean lightening the tax burden a fair amount, probably allowing us to renovate another room every couple of years :D Will go the advisor route.

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Now it’s my turn to dredge up this topic.

 

I was put onto this investment possibility by a colleague who has already done it for himself. The intention is not to buy somewhere and do the renovations ourselves but to go via an investment advisor, or one of the companies adverting their services in this area, such as:

 

Das Baudenkmal.de or Denkmalimmobilien

 

However, like others that have already posted, I am not fully clear on how the scheme works and would like to get a bit more background before picking up the phone to an advisor, who will I am sure, as soon as they get a whiff of commission, never leave me alone. My colleague already gave my contact number to his advisor and the guy has already called me 10 times in two weeks!

 

So, for example, one of the properties on the Baudenkmal page has the following calculations associated to it:

 

Kaufpreis "Einheit 17":.....€149.565,00 (2.950,00 €/m²)

Werbungskosten (innerhalb von 12 Jahren):...€123.307,00

Rückerstattung:....€52.086,00

Effektiver Kaufpreis:.....€97.479,00 (1.922,66 €/m²)

Überschuss nach Steuer vor Tilgung p.M.:....€296,00

Nachsteuerrendite:... .....6,37%

 

Am I correct that the "Effecktiver Kaufpreis" is the cost still to pay after receiving my tax benefits and I will need to cover myself over the 12 year period by renting the place out?

 

Is that in general how the model works? I invest, get some tax benefits, rent out the property to cover the remaining "Effectiver Kaufpreis" and can then sell the place once the 12 years are over and hopefully make a tidy profit? Or am I missing something fundamental?

 

I assume there are many other costs and risks involved but are these Internet brokers trustworthy?

 

I have a list of other questions I need answering but will take them to an advisor once I can at least get a basic understanding of how this investment works.

 

Thanks for any answers...

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Am in a bit of a hurry, so here's a summary:

 

You would only get back 52.086 on 123.307 of money that you had spent if your personal tax rate was 42.24%, which would only be the case if your yearly income was above 250,731€.

 

If your income is lower than you will get back much less, i.e. you would have a higher effective purchase price.

 

Disadvantages of these offers:

 



  • high repair costs because every repair has to be approved by the Amt für Denkmalschutz
  • most of these flats are overpriced, and you will get a nasty surprise when trying to re-sell it down the line
  • in many towns/cities it is hard to get a good rental rental return (remember, you'll also have to pay income tax on that rental income!), and you risk tenants who won't pay at all but will nevertheless take ages to get out of the flat again (think 1 to 2 years and court and lawyer costs)
  • it is always a bad idea to let a flat in a city that you don't live in yourself: the tenant will exploit that fact

 

These flats are often flogged to dentists, who should have known better, and there's a standing joke in German that many dentists only drill to pay off their Schrottimmobilien (usually located in Eastern Germany).

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I’ve got a friend going through this right now, he’s looking at a listed property. In laymen’s terms it works (more or less) like this.

As an owner renovations are not tax deductable, expect, for a small deduction for labor. That is only to discourage cash under the table jobs. If you own an investment property than renovations are deductable. If you are doing a major modernization than those costs can only be deducted over 40 or 50 years depending on the age of the building. Now enter Denkmalgeschützte

For owner occupied units you can claim 9% of the cost over 10 years.

For rental properties its 9% for 8 years and 7% for 4 years.

As PandaMunich pointed out you’ll get back, perhaps, between a 1/4 to ½ depending on your personal tax situation. My understanding is also, that these tax savings can’t be passed on should you decide to sell the property before the time is up. Anyone who has watched Grand Designs or The Renovation Man on Channel 4 will agree with what Tobias Just and Wolfgang Maennig had to say about listed* buildings in their book Understanding German Real Estate Markets...

Quote

 

. however, investors face inflexible monument protection offices that dictate an obligation to conserve the current status quo.

-and-

Qualified experts who know the regulatory mechanisms and local idiosyncrasies are difficult to identify, and even then come at a considerable cost. Overall, zoning and listed properties may be less attractive for international investors in view of the rather complex regulatory practices in Germany.

 

No kidding!

*They referred to them as monuments but I think a historical buildings is probably more accurate.

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