In principle, the sale of a property that has been held for less than ten years is subject to income tax. Excluded from this are properties that were exclusively owner-occupied between acquisition and sale and were therefore occupied by the tenant. Their sale is tax-free. The joint use of roommates such as family members is harmless.
The Federal Fiscal Court (BFH) recently had to decide for the first time on a question as to whether it is still exclusively for personal use. So far, the BFH has not commented on whether renting individual rooms of the owner-occupied property to third parties, such as via Airbnb, by the day affects the tax exemption of property sales. The BFH made up for this with its judgment of July 19, 2022 (IX R 20/21).
In the present case, the taxpayer had rented two rooms on the top floor to trade fair visitors on a daily basis in the property he otherwise used himself, and this generated income from renting and leasing. The property was then sold, including the rented rooms, and the capital gain declared as non-taxable.
Capital gains are pro rata taxable
The tax office subjected the capital gains to tax in relation to the rented premises in relation to the total area, while the tax court shared the taxpayer’s view. The BFH ruled that the capital gains on sale should be treated as taxable proportionate to the ratio of the rented rooms to the total living space, since the criterion of use solely for personal living purposes is not met. It is pointed out that there must be continuous personal use over time. In addition, the BFH also commented on possible spatial or temporal de minimis limits and completely ruled them out.
Property owners should therefore reconsider renting out to third parties on a daily basis. Anyone who rents out their property to a third party for just one day a year can risk a pro rata taxable capital gain.
The author is a tax advisor at KPMG.