2024-04-19 07:11:03
When taxing income from an apartment, most landlords still use the so-called flat rate, i.e. 30 percent of income. In some cases, however, it may pay off for apartment owners to claim real, demonstrably incurred expenses. This applies in particular to those who have an apartment in personal ownership acquired less than five years before the start of the lease.
In such a case, they can use depreciation without major additional costs and, along with it, they can also deduct other demonstrable expenses from rental income. This will usually reduce the tax base significantly more than flat-rate expenses.
The most significant item among the actual expenses is usually the depreciation of the apartment. They can only be used for apartments in personal ownership, with the exception of those that were acquired by donation and the donation was exempt from income tax, which happens, for example, with an apartment that was purchased as a gift from parents. Depreciation also cannot be claimed when renting cooperative apartments.
Depreciation is determined from the so-called entry price. If the lessor purchased the property less than 5 years before the tenancy began, determining the entry price is relatively simple. The entry price corresponds to the purchase price resulting from the purchase contract. It is still possible to increase this by the costs demonstrably spent on repair and technical evaluation. In practice, the purchase price usually also includes a part corresponding to the share in the land. Since land cannot be depreciated, the purchase price should be divided into a part corresponding to the share of land and apartment.
If the property was acquired more than 5 years ago before the start of the tenancy, it will be necessary to have an expert valuation drawn up, which entails additional expenses. The entry price is the price determined according to the Valuation Act.
Other important items that landlords can include in the costs are maintenance and repair expenses, interest on the mortgage for the purchase of the property, rental property insurance, real estate tax (if paid), or flat-rate transportation expenses.
Maintenance and repair costs
When assessing the tax deductibility of expenses for the repair and maintenance of an apartment, it is necessary to examine individual expenses from several points of view. It must always be expenses spent on achieving, securing and maintaining income from renting an apartment.
In practice, it is necessary to distinguish whether these are expenses for repairs or technical evaluation. If it is a routine repair, the expense is applied as a one-off expense in the year in which it was incurred. If it were a technical evaluation, the expense would be reflected in the tax costs in the form of a write-off from the increased input price.
The technical evaluation is the expenditure on completed superstructures, extensions and building modifications, reconstruction and modernization of the property, if it exceeds the amount of 80 thousand crowns.
In the case of routine repairs and maintenance, the wording of the rental agreement, which shows what the lessee is obliged to pay and what the lessor is obliged to pay, is essential for assessing the tax deductibility of the load. The tenant usually pays for routine maintenance himself. If, according to the contract, the lessee pays for the regular maintenance himself, then the lessor cannot include such expenses as tax expenses, even if he paid them of his own free will.
The lease agreement should also indicate whether the tenant is entitled to make adjustments to the nature of the technical evaluation, or whether he can then depreciate them.
A frequent expense for landlords are payments to the so-called repair fund and to the account of the community of owners. Even with these payments, a distinction should be made as to what they are intended for, i.e. whether they are intended for technical evaluation or operational expenses.
If it were to happen that expenses intended for operation (historically applied in tax expenses) would be used for technical evaluation, the lessor will increase the tax base by these expenses in the year of the change in the determination of expenses and at the same time increase the input price for the purposes of tax depreciation.
Changing the way expenses are applied
The way in which the landlord applies the expenses can be changed from year to year. However, in the event that one year he applies actual expenses and the next year he intends to apply flat-rate expenses, he is obliged to submit an additional tax return for the period preceding the change in the application of expenses and to adjust the tax base for outstanding liabilities and receivables.