The question is, how will rental income will be taxed and how is this additional revenue entered into the tax return.
Rent received is income
From a tax perspective, income from rent payments is treated the same as wages and salaries. Income is usually earned from employment or self-employment. The situation is different when it comes to rental income. According to the Income Tax Act (Einkommensteuergesetz) this is regarded as income from renting and leasing.
Consequently, they must also be included in the tax return (Steuererklärung) and taxed accordingly. Rental income is recorded in Anlage V (Rental and Lease income). The amount of the taxes to be paid depends on the individual tax rate (Steuertarif) of the landlord. Any expenses and deductions may reduce the tax burden (Steuerlast).
What is rental income?
Basically, it does not matter where the rental income comes from.
Such income is obtained from the following examples:
• Renting a house • Renting a condominium • Renting an apartment in a house • Renting an apartment • Leasing immovable property • Subletting a room in your own apartment
Rental income consists not only of the rent or lease, but also of various additional costs, which the tenant pays.
Note: Business people tax their rental income as income from self-employment. They are thus officially part of the business assets.
Are there any allowances (Freibeträge)?
Each landlord will be granted statutory allowances (Freibeträge). First and foremost, the basic allowance (Grundfreibetrag) is relevant. In 2018, this will be € 9,000 for individuals and € 18,000 for married couples. This allowance is universally valid. Every citizen of Germany is entitled to it. Up to this limit, all income is tax-free.
Rent receipts lead to a tax burden when the sum of the income from all types of income exceeds the basic allowance, plus any child allowances.
Income from short-term rentals is not a private matter. This means that revenue from advertisements on Airbnb and Co. are taxable. It does not matter if the person is a tenant or if he is the owner of the housing unit. Ultimately, however, the personal situation determines whether taxes are due.
Anyone who intends to earn a profit from subletting usually has to pay taxes. Should this goal not be pursued, then the letting activity falls under "Liebhaberei".
Liebhaberei is only mentioned when the rent per square meter obtained by renting is less than the rent per square meter that has to be paid. If this is the case, then no costs for, for example, cleaning etc. can be claimed for tax purposes. Nevertheless, it is advisable to keep all receipts and invoices should the taxman still ask.