Rental income calculation

47 posts in this topic

On 12/15/2010, 6:09:55, PandaMunich said:

Ok, here it is, because you asked nicely in the PM...

 

Disclaimer: I'm not a tax advisor. In Germany only tax advisors (Steuerberater) are allowed to give tax advice. So double check everything with a professional.

 

see here for the double tax treaty between Italy and Germany (in German and Italian)

 

 

That was the old regulation, valid until 2008.

 

 

 

This is correct starting with 2009.

So for a rental profit of 12,000€ per year, you would have to pay following taxes:

2,702.00€ income tax

148.61€ solidarity tax to help pay for the costs of the German re-unification (Solidaritätszuschlag)

_________

2,850.61€

 

The good/bad news is that you have to tell the Italian tax department what rental profit you had in Germany and they will add it to your other Italian income and calculate a tax amount you have to pay for everything. The Italian tax department will then reduce this tax amount by the German tax (2,850,61€) you have already paid.

 

So depending on your personal tax rate in Italy this is good or bad news.

 

 

 

The tax department is not allowed to give out tax advice. The embassy isn't the right place to ask either. In Germany only tax advisors (Steuerberater) are allowed to give tax advice.

 

 

No. Banks only do direct source taxation on interest you earn with them or from profits when you sell stocks (for those it would be a flat tax of 25%)

 

For all other kinds of income you (or your tax advisor if you employ one) have to fill in tax forms at the end of every year (until May 31st for the preceding year) stating your income and do an income tax return by either submitting these forms them electronically or in paper form (or a combination of both) to the German tax department (Finanzamt). See here for a description of electronic submission via the Elster software.

 

I advise you to do it in paper form, because the tax department will want to see paper proof for everything, including the purchase contract done at the notary and the rental contract.

 

You can give the German tax department the permission to take the tax they calculate after processing your tax forms directly from your German bank account. This is called "Einzugsermächtigung". That way you will never be late with a tax payment.

 

Don't forget to make a copy of everything (including your filled in, signed tax forms) before you send it to the tax department by snail mail.

 

Since you will have rental income in Munich, that will probably be, depending on what the first letter of your surname:

 

A to E

Finanzamt München I

80276 München

 

F to I:

Finanzamt München II

80269 München

 

J to M:

Finanzamt München III

Deroystr. 18

80335 München

 

N to S (without Sch)

Finanzamt München IV

Deroystr. 4

80335 München

 

T to Z (and Sch):

Finanzamt München V

Deroystr. 4 / Aufgang II

80335 München

 

************************************

What tax forms will you have to submit:

- Mantelbogen for persons with limited income tax liability= form ESt 1 C

This is the general form everybody has to fill in, with your name, address, bank account details

- Anlage V Form for stating your rental income, expenses, depreciation and as a result, your rental profit/loss

 

************************************

How to fill in the Mantelbogen form ESt 1 C

 

line 1: cross to the left of "Einkommensteuererklärung"

line 3: your tax number: leave empty the first year, they will then assign you one which you'll have to fill in the future

line 4: ID number: leave empty, only people living in Germany get one

line 5: name of your tax department, e.g. if your surname is Schiaparelli --> starts with Sch --> fill in: Finanzamt München V

 

line 6: your surname and date of birth

line 7: your first name

line 8: your street name and number

line 9: postal code, city

line 10: your country of residency: Italien

line 11: your nationaliy: Italienisch

line 12: city of birth

line 13: your profession, e.g. Ingenieur

 

line 14: your bank account number and bank sort code

line 15: your IBAN: international bank account number, long alpha-numeric string, starts with DE for German bank accounts

line 17: name of your bank, city it is in

 

line 22: cross to the left of "lt.Anlage(n) V"

line 22: To the right of "Anzahl" write the number of apartments/houses you rent out. I suppose: 1

 

line 34: to the right of "lt. Anlage", fill in: V

 

line 66: cross to the left of "Nein"

 

line 79: cross to the left of "als steuerpflichtige Person."

 

line 80: write the date and sign

 

************************************

How to fill in Anlage V (attach as many as you have rented out apartments/houses)

 

line 1: your surname

line 2: your first name; cross to the left of "zur Einkommensteuererklärung"

line 3: your tax number: leave empty the first year, they will then assign you one which you'll have to fill in the future

 

line 4: street name and number of the rented out apartment/house

line 4: "Angeschaft am": date when you bought it

line 5: Postleitzahl: postal code; Ort: city in which your rented out apartment/house is

line 5: "Fertig gestellt am": date your rented out apartment/house was built

 

After you buy the apartment/house you will get a letter called "Einheitswertbescheid" from the Munich tax department, giving you a "Aktenzeichen" (a long string of numbers, e.g. 145/405/1234/006/034/9)

line 6: write this long number "Aktenzeichen" from the "Einheitswertbescheid"

line 7: total square metres of all your apartments, e.g. 50 if you have one, 350=150 if you 3 apartments of 50sqm each in that building

line 8: depending on the fact on which floor your apartment is, choose a columns to fill in: Erdgeschoß = ground floor; 1. Obergeschoß = 1st floor; 2. Obergeschoß = 2nd floor; weitere Geschosse: anything above that

and fill in: your rental income in that year without the costs for heat, water, etc. = cold rent = Kaltmiete

Write the total amount for all floors in field 01

 

line 9: Anzahl: number of your your apartments on that floor

line 9: Wohnfläche: total square metres of all your apartments on that floor

 

Each year the company administrating the apartment building (Hausverwaltung) will send you a "Hausgeldabrechnung" with an overview of what the heat, water, repairs cost in that year. They will also write in there which costs you can oblige your tenant to pay (heat, water, maintenace of lift, ...) and which you have to bear yourself, like that company's fee and the repair costs.

line 12, field 4:

Normally the tenant will pay an advance on these "Nebenkosten" (utility costs) to you every month together with his "cold rent". Add up all these utility cost payments your tenant made to you that year, subtract the reimbursements you made to him when he overpaid you on utilities and write the total into field 04

 

line 15: if you also rent out a parking space, put in the income for that year from that into field 07

 

line 20: add up the amounts from field 01, field 04 and field 07

line 21: forget about that for now, here you have to fill in the sum of (depreciation + interest costs + all real costs from the "Hausgeldabrechnung") which you only calculate later on, on the second page in line 50!

line 22: rental profit or loss = subtract amount in line 21 from amount in line 20

 

line 33: here you will put in the amount of depreciation

- if the apartment/house was built in 1924 or earlier: 2.5% of the "Pure building price"

- if the apartment/house was built in 1925 or later: 2% of the "Pure building price"

Now the calculation of the "Pure building price" is a bit complicated, but bear with me. The idea is that your apartment /house stands on some ground and that the price of the ground doesn't change the older the house gets, but that the apartment/house itself gets older and will be worth less with time.

So how does the ta department how much of the price you paid was for the ground and how much for the building standing on it?

They have a committee that decides every year how much a square metre of ground is worth in a certain region (= Bodenrichtwert).

Depending on where your apartment/house stands in Munich, this can be 700€ per square metre of ground or even up to 5,000€ per square metre of ground.

-------------------------

You can find out this Bodenrichtwert by phoning the Finanzamt and asking them for it for that certain street. They don't like giving it out, but just say you bought an apartment there and now need this value to do your tax declaration and then they will tell you. Just be sure to phone another person when you want to ask it for another street!

 

The Finanzamt doesn't like telling you the Bodenrichtwert because another state institution, that "committee", charges 30€ per information if you ask them, see here: http://tinyurl.com/24lgvyg

-------------------------

 

They then subtract this "imaginary" value of the land the building stands on from your purchase price and the result is the "Pure building price".

 

Example:

Bodenanteil = value of ground your apartment stands on: 50/1000 x 400qm = 20sqm

Bodenrichtwert= "imaginary" value per sqm: 3,000 €/qm

Wert Bodenanteil = value of ground part = 20sqm x 3,000 €/sqm = 60,000€

Prozentsatz Bodenanteil = percentage of ground costs = 60,000€ / 180,000€ = 33.33% (assuming you paid 180,000€ for the apartment)

 

Now we get on to the calculation of the "Pure building price":

180,000€ Purchase price of apartment

1,000€ cost of notary

6,264€ estate agent fee (3.48% of purchase price)

500€ fee to enter your name into the land register

6.300€ real estate transfer tax (3.5% of purchase price)

______________

194.064€ real total purchase price

--> part of that for ground: 33.33%: 64,688€

--> part of that only for building: 66.67% = "Pure building price": 129,376€

 

Depreciation over 50 years (I assume it was built after 1924):

0.02 x 129,376€ = 2,587.52€ is the yearly depreciation

 

line 33, column 1 and column 4: put in the amount of yearly depreciation, e.g. 2,587.52€

line 36, column 1 and column 4: put in the interest you pay on the mortgage (only the interest, not the part with which you actually pay off the mortgage!)

 

line 39, column 1 and column 4: repair cost out of "Hausgeldabrechnung"

line 46, column 1 and column 4: land tax (= Grundsteuer, between 150€ and 300€ per year), real utility and other costs from "Hausgeldabrechnung"

line 47, column 1 and column 4: fee of company adminitrating the building (= Hausverwaltung)

 

line 50: sum of all above costs in column 4

--> now copy that amount from line 50 into line 21 on the first page and calculate your rental profit or loss in line 22

 

Congratulations, you're done.

Don't forget to make a copy of everything (including your filled in, signed tax forms) before you send it to them by snail mail.

 

***************************************

 

There is a big pitfall in above depreciation.

 

If you buy a apartment it can pay off to rent it out because you only own a small share of the land under the building (20 sqm in the example).

 

However, if you buy a house with 400sqm of ground, then you will have as the total "imaginary" land value a huge amount. Regions with houses typically have a Bodenrichtwert of around 700€/sqm in Munich.

 

Example:

Price of house: 400,000€

Land value according to Bodenrichtwert: 400sqm x 700€/sqm = 280,000€

--> "Pure building price" = 400,000€ - 280,000€ = 120,000€

They don' take into account what the "real" market value of that building alone would be, they just stubbornly subtract the "imaginary" land price from the price you paid and then you can only depreciate 120,000€ over 50 years, i.e. 2,400€ depreciation per year for an outlay of 400,000€!

 

***************************************

 

Are you really aware of all the bureaucracy that is involved in renting out an apartment in Germany?

A tenant has a lot of rights here and it's kind of difficult to repair a broken water pipe when you're actually in Italy. Please remember a tenant has a legal right to have things repaired immediately! If you don't jump when he says so, he will pay you less rent until you do the repair and it's absolutely legal.

 

It can also be difficult to get a tenant out of the apartment even if he stopped paying the rent and utilities. You have to drag him through the courts for 2 years until you get an eviction order and the procedure will cost you between 6,000€ and 10,000€ (lawyer, court costs, bailiff = Gerichtsvollzieher, deposit costs for tenant's furniture, ...).

 

These things are all much more complicated if you don't live in the same city as your tenant, let alone in a different country...

 

Please consider all these aspects carefully before deciding.

 

 

 

This is a really great thread, as always, by Panda, and well worth a read.

 

 

 

 

 

 

what particularly interests me is:

 

 

 

So how does the ta department how much of the price you paid was for the ground and how much for the building standing on it?

 

They have a committee that decides every year how much a square metre of ground is worth in a certain region (= Bodenrichtwert).

 

Depending on where your apartment/house stands in Munich, this can be 700€ per square metre of ground or even up to 5,000€ per square metre of ground.

 

-------------------------

 

You can find out this Bodenrichtwert by phoning the Finanzamt and asking them for it for that certain street. They don't like giving it out, but just say you bought an apartment there and now need this value to do your tax declaration and then they will tell you. Just be sure to phone another person when you want to ask it for another street!

 

 

 

The Finanzamt doesn't like telling you the Bodenrichtwert because another state institution, that "committee", charges 30€ per information if you ask them, see here: http://tinyurl.com/24lgvyg

 

 

 

 

 

 

 

 

 

 

 

i only ask, as I own and rent out an apartment in Coventry, UK.

 

I purchased the flat in 2006 as a 'leasehold'  (i.e. i only own the bricks and mortar, not the actual land itself).

 

 

 

-

 

  • Is there any Committee in Germany who decides what the square meter of ground is worth in Coventry, UK?

     

  • or is this only a consideration for property here in Germany?

     

 

If anyone has any ideas  / advice  / experience / clue....please feel free to shout!!!!!

Cheers

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I think you'll find legally that you own neither the land, nor any structures upon it, because if the lease expires everything reverts to the freeholder.  I also understand that transaction in land in the UK are for the land itself, as opposed to the land and any structure separately but I am not a lawyer, so could be wrong.  But, if you need to find a value of land and/or buildings in the UK, I would suggest you would need to approach the Valuation Office Agency, which in an Executive Office of HMRC.

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Guten Tag, Everyone,

 

I am looking for some expert advice regarding the taxation of German "Erbengemeinschaft" property rental income for a US citizen. The scenario is here:

 

Older relative passed away in Germany December 2019. Inheritance was decided by German estate court in April 2020:

2 heirs, younger brother (Germany) and older brother (US citizen), in a German "Erbengemeinschaft" (community of co-heirs) of 50% each until we can divide

Several rental objects in different German cities, comprised of apartments/garages/houses

German inheritance tax and "Erbengemeinschaft" income tax in Germany are already being handled, so my question is about the US side of things

 

Questions

How is income and estate taxation handled between US and Germany? In Germany, income from all of the rentals is aggregated into one total sum number for the "Erbengemeinschaft" and reported onto one Form "V". We brothers don't get to claim rental income per object, but each of us then has to claim 50% of that total number on our German income tax.

 

In the US for worldwide income would we need to "mirror" this by claiming 50% of rental income for each rental object and filing Schedule E's for each object, then depreciate? Or, can Erbengemeinschaft income in the US also be handled like it is in Germany, more like a US probate estate or trust, where individual objects are not reported until the estate is actually settled and assets are distributed among the beneficiaries?

 

If depreciation, then there are several rental objects, how to partition them for depreciation, given that about half of them will go to the other brother once the Erbengemeinschaft is distributed and also several will have to be sold to pay for inheritance taxes?

 

There are so many knowledgeable folks here and I'm hoping that someone will know something about this area that's giving me sleepless nights recently :-)

 

Thanks,

Stephen

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My sister is your situation. She is living in the US and has been using the income as per the German "Festsetzungsbescheid" for the IRS.

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Thanks, Jeba, this would seem to be the most logical way.

 

Does she also depreciate the rental objects on Schedule E, or is that only possible after the objects have been distributed from Erbengemeinschaft ("community of co-heirs")? I am wondering how the basis value would be established. Maybe it is taken from the Festsetzungsbescheid somehow?

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13 hours ago, Keaukaha said:

Thanks, Jeba, this would seem to be the most logical way.

 

Does she also depreciate the rental objects on Schedule E, or is that only possible after the objects have been distributed from Erbengemeinschaft ("community of co-heirs")? I am wondering how the basis value would be established. Maybe it is taken from the Festsetzungsbescheid somehow?

Sorry, I can´t help you there. I don´t even know what a "schedule E" is nor do I understand what you mean by "the objects have been distributed from Erbengemeinschaft". I only know that she uses this number because the accountant of our "GbR" is sending the Festsetzungsbescheid to me and I´m merely forwarding the amount of her share of taxable income to her. And she´ll forward it to her accountant (I´m sure without having any extra thoughts or knowledge about what he´ll be doing with it).

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11 hours ago, jeba said:

Sorry, I can´t help you there. I don´t even know what a "schedule E" is nor do I understand what you mean by "the objects have been distributed from Erbengemeinschaft". I only know that she uses this number because the accountant of our "GbR" is sending the Festsetzungsbescheid to me and I´m merely forwarding the amount of her share of taxable income to her. And she´ll forward it to her accountant (I´m sure without having any extra thoughts or knowledge about what he´ll be doing with it).

No problem, Jebra, and I really apreciate the feedback. I was just wondering if your sister was able to take advantage of the famous "step-up-in-value" that is discussed so much in the news nowadays. 

 

Let me restate, in the hope that someone else knowledgeable about the US side of things might have a beginning of an answer? @straightpoop, would you possibly know? 

 

Under German law, the heirs form an Erbengemeinschaft until the assets are distributed to them. Under US law, the assets left by the decedent form an estate, which is a separate legal/tax entity.

When do the heirs have to indicate their inheritance in the US (by filling in  Form 3520)? Immediately, or when they actually receive assets? Under German law, being part of an Erbengemeinschaft means having received assets and being subject to Erbschaftsteuer and income tax (Feststellungserklärung). Under US law, heirs are not considered to have received a bequest or gift until assets are distributed from the estate.

What about income from the assets (dividends/rent) generated after the death of the bequeather if that income is not yet distributed to the heirs? At what point does it have to be reported on their income tax?

 

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