Expensing/depreciate laptop and telephone

[Nixon 2]

Hello,

I have a Single member LLC in the US (rental property) and I reside in Germany.
Can I buy a laptop and a telephone and lower taxes I pay in Germany?
Any info on requirements what would have to be done in order to complete the tax filing later on?

Thank you for your help,

Nixon

[PandaMunich 16,915]

>I have a Single member LLC in the US (rental property) and I reside in Germany.
Can I buy a laptop and a telephone and lower taxes I pay in Germany?
If you use them only (= next to no private use) to administer your US rental property, you can use them as a rental related expense in your US rental profit calculation, i.e. reduce your US rental profit by the cost of the laptop (this one you get to deduct 100% of its cost as an expense immediately, no matter how expensive it was) and 100% of the cost of the smartphone if its net cost was up to 800€ (so its price including VAT can have been up to 952€) as a GWG = geringwertiges Wirtschaftsgut = low-value asset (from 2024, the GWG limit rises to 1,000€ net, i.e. 1,190€ including VAT). 
If the smartphone cost over the GWG limit, you have to depreciate it over 5 years, i.e. over 60 months (example: phone that cost 999€ bought on 30.11.2023 --> depreciation in 2023 tax return only 2/60*999€ = 33.30€): https://www-finanztip-de.translate.goog/geringwertige-wirtschaftsgueter/?_x_tr_sl=de&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp

But as you hopefully learned from the answer to your other question: https://www.toytowngermany.com/forum/topic/393024-foreign-tax-credit-and-dividends-for-us-tax-exempt-bond-funds/#comment-3956170
this will not lower the taxes you pay in Germany:

• If you will still make a loss from your US rental, your German income tax rate will not rise because of the US rental.
  
• If you make a profit from your US rental (even after all the carried forward accumulated loss from the earlier years has been applied to this year's US rental profit), then having used the laptop and phone as a rental expense will only mean that your the German income tax rate that has been increased by your US progression income (= by your remaining US rental profit after application of the the old losses) which is charged on your other income (= on your salaries or on your freelance profit) will be a bit lower than it would have been without the laptop&phone as expenses.
  In other words, because of them, your German income tax rate will not be increased by so much.
  

>Any info on requirements what would have to be done in order to complete the tax filing later on?
I don't know what you mean by that.

If you meant that you have already filed the tax return and now want to retroactively introduce these costs into that tax return, then that is only possible:

• if the Bescheid has not yet been issued, by sending your local Finanzamt an e-mail citing your Steuernummer and asking them to also consider them as rental expenses.
  
• if the Bescheid has already been issued, but no longer than 1 month and 3 days ago (if that date falls on a weekend or on a public holiday, then you get until the next working day), then by writing an Einspruch (by e-mail will do) that has to reach the Finanzamt within 1 month and 3 days of the date written on the Bescheid.
  

If the Bescheid is already "older" than 1 month and 3 days (if that date falls on a weekend or on a public holiday, then you get until the next working day), then you can no longer introduce these costs into the tax return for that year.
In that case, I suggest that you voluntarily depreciate the laptop and phone over 5 years, because that way, you only lose the few months of depreciation in the "already set in stone" tax return for the year in which you bought them, but will at least still have the remaining depreciation amounts to use in the other 4 future tax returns.

[Nixon 2]

Thank you PAnda on your detail reply.

We still didn't buy them, I just came to the States yesterday (that is why I am replying a few days later) and wanted to ask in advance what is possible.
As of requirements, I was wondering, for example, is it mandatory to use LLC's card to buy it or I can use my personal one?

Thank you again.

[PandaMunich 16,915]

>Nixon wrote: is it mandatory to use LLC's card to buy it or I can use my personal one?
Since we know from your other thread: https://www.toytowngermany.com/forum/topic/393024-foreign-tax-credit-and-dividends-for-us-tax-exempt-bond-funds/#comment-3956163
that your US rental loss was included in Anlage AUS of your German personal income tax return, the Finanzamt classified your LLC as a "Einzelunternehmen" (and not as a capital company) in the Rechtstypenvergleich, which means that you are allowed to use your personal credit card to buy the laptop that you want to use only for your US rental.

However, on the US side, you may lose the liability protection the LLC has in the USA, since using your personal assets (= privat credit card) to buy a laptop for the LLC would risk "piercing the corporate veil":

• https://www.wolterskluwer.com/en/expert-insights/singlemember-llc-vs-sole-proprietorship
  Note: Single-member LLCs must be careful to avoid comingling business and personal assets. This could lead to what is called piercing the corporate veil and the loss of your limited liability.
  
  
• https://www.wolterskluwer.com/en/expert-insights/how-to-avoid-piercing-the-corporate-veil
  
  
• Don’t comingle business and personal assets. Keep business assets separate from the assets of the owner(s). Have a business checking account and business credit card and only use these for business expenses. Also keep assets such as equipment and property separate.

--> to satisfy US rules, you should only buy your LLC things by using your LLC's credit card.

[Nixon 2]

Thank you PAnda!

We will do it like that, LLC's debit card. That is how we do it for other stuff too.
We are trying to be informed on the US part as much as we can, but the the German side is what scares us :-(

Have a nice week,

Nixon.