Flipping Your Pad for Cash: All About Subletting and Taxes in Germany
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In the world of real estate, subletting can be a lucrative venture. But, before you start cashing in on that extra room or apartment on Airbnb, Wimdu, or 9Flats, it's crucial to understand the tax implications. The Federal Association of Tax Assistance Associations (BVL) has issued a warning, and we're here to help you avoid any potential trouble with the tax office.
Taxable if Earnings Exceed €520 Annually
If you sublet only occasionally and earn less than €520 per year, you can breathe easy. These earnings are not taxed, but it's still a good idea to document them just in case the taxman comes knocking. However, if your rental income exceeds €520 annually, it must be declared in your income tax return.
For those who permanently sublet their living space or parts of it, the tax return is a must if the income exceeds €410. This is when the income minus expenses surpasses the threshold.
The Intention to Generate Income
The tax office will consider these earnings as taxable if there's a clear intention to generate income. This is usually assumed when subletting permanently, meaning that subletters strive to make a profit in the long run. For example, if you charge guests more than what you pay for rent, utilities, maintenance, and other costs, you'll have a surplus.
Calculating your costs can be more complicated when subletting individual rooms. In this case, the total costs for the apartment are allocated proportionally. For example, if the sublet room makes up 20% of the living space, only 20% of the total apartment costs can be used as a basis. Similar adjustments should be made for costs shared with multiple users, such as bathrooms.
Steer Clear of Tax Evasion Accusations
If you sublet living space on a tax-relevant scale and don't declare it in your tax return, the accusation of tax evasion could quickly surface, especially if you use platforms like Airbnb. The tax authority often targets such platforms to locate taxpayers, and operators are required to report users with at least 30 rental transactions in a year or those generating at least €2000 in income through the platform.
Remember, when it comes to subletting and taxes in Germany, it's always better to be safe than sorry. Consult a tax advisor to ensure compliance with all tax obligations and to optimize your tax situation. Happy subletting!
- For those who engage in vocational training to offer vocational training services as a form of personal-finance, it is crucial to understand that tax implications come into play when earnings exceed €520 annually.
- To avoid any potential tax evasion accusations and ensure compliance with all tax obligations, one should consider consulting a tax advisor when subletting in Germany and declare any taxable income arising from subletting activities.
