How Does Renting/Owning/Selling Property Affect My German Taxes?

How Does Renting Out a Home Overseas Affect My German Taxes?

For German tax purposes the income from a foreign rental property is calculated according to German tax rules. Under German tax rules you can offset interest payments on a mortgage, a 2% annual depreciation on the purchase price of the building and any other expense in relation to the property against the rent you receive. In many cases this will leave you with a negative figure for German tax purposes.

How Does Selling My Home Overseas Affect Capital Gains?

As long as you sell your house in the same year in which you have stopped using it as your own home (provided it was your own home for the two previous years as well) it will not be relevant for German tax purposes. If you have owned a property for more than 10 years before you sell it, you will also not be taxed on a capital gain in Germany. Typically a capital gain from a property (which does not qualify for the German relieves as described above) is taxed in the country in which the property is located. In most cases Germany will not tax such a capital gain, but take the gain into account to determine your tax rate on your German income (depends on the country where the property is located).

Are There Tax Incentives for Buying A Home Here in Germany?

Unfortunately there are no tax incentives currently provided under German law for owning your own home.

How Does Buying a House in Germany to Rent Out Affect Me as an Expat?

You can offset against your rental income:

Interest payments on your mortgage
2% annual depreciation (on the purchase price of the building)

In most cases this will result in negative rental income for tax purposes.

If you are tax resident in Germany and have other sources of income in Germany (i.e. salary) you can offset your negative rental income against your salary.

Are There Benefits for Buying A Home Here in Germany?

Since 2018, you can apply for a special benefit which is called the ‘Baukindergeld’. You have the chance to receive an amount of 12.000,00 EUR for each child from the German state directly to your bank account within the following 10 years after the application. The requirements are:

Your new home will be the only home you have
You have children living in your home up to an age of 18
You buy or build the new home after 01st January 2018
Your total household income is not more than 90.000,00 EUR per year, if you have one child. For more children, the maximum amount will increase to 15.000,00 EUR for each additional child.

An application must be submitted in additional to your German tax return. You can find the application forms at: www.kfw.de/baukindergeld.