Anyone who has real estate and wants to tax it optimally should appreciate the depreciation. Although it is usually only 2 % of the acquisition costs per year, there are ways to reproduce the depreciation in the long term. On the one hand, by selling already depreciated properties to relatives or own companies, it is possible to write off properties twice. But you can also write off real estate twice with a GmbH & Co. KG. This is because it can use the commercial stamping according to § 15 (3) no. 2 EStG to make depreciation. Ten years before the sale of the properties, however, they can also be commercially unwritten, so that the sale can be tax-free.

Write off real estate twice – Introduction

Real estate that is managed in private property has the advantage that it can be sold tax-free after ten years. In addition, you can make an annual depreciation of at least 2 % on the acquisition costs, which can be tax-attractive depending on their amount. At least this is a small bonus that you like to take advantage of. However, whether the depreciation itself can justify a tax design around real estate ownership may still seem doubtful – at least at first glance.

In this article, we intend to present a design model with which real estate can be written off twice. In addition, when the time for the sale is ripe, a tax-free sale should also be possible.

double depreciation of real estate within your own family

Many of our readers already know that real estate can be written off twice from previous posts in which we had included family members in our models. Thus, the sale of real estate to your own children is ideally suited to generate renewed depreciation potential. The children can then pay the purchase price via the rental income, because the depreciation of the highest possible purchase price helps to correspondingly high net rental income. In this way, you can also avoid a possible inheritance tax on real estate ownership. A gift tax is therefore of course also obsolete.

Write off properties alone twice

But if you have real estate alone and want to use tax-optimized depreciation, you can also write it off twice. However, this logically requires a slightly longer-term planning. In addition, we need a special company construct for this, namely a GmbH & Co. KG.

The best way to explain our design model is by means of a practical example. Heribert houses has a considerable real estate asset, which he inherited from his grandmother many years ago. Due to this circumstance, the properties are soon completely written off. In a few years, this tax approach will be eliminated, so that future rental income is completely subject to taxation. Of course, Heribert Haus wants to prevent this. So he asks us as his tax consultants how he can keep the depreciation.

Our advice is that he should found a GmbH & Co. KG. After the depreciation of the real estate has been done for the last time, he then sells it to his Immobilien-GmbH & Co. KG. For this purpose, he should set as high a realistic purchase price as possible. If the GmbH & Co. KG has sufficient equity, it can pay the purchase price directly. However, it is more interesting that the company receives a loan from its shareholder. Because of this, it can also tax the financing costs. Whether this is really worth it, however, also depends on the amount of rental income. The higher these are, the more sensible such a loan is from a tax point of view.

However, this is only a minor aspect. Because the biggest tax saving succeeds Heribert houses over the now very high depreciation. The fact that he can achieve this with his GmbH & Co. KG is due to the commercial character of the limited partnership. According to § 15 paragraph 3 number 2 EStG, it belongs to GmbH & Co. KG.

Do double depreciation or tax-free sale of real estate?

However, the commercial character of GmbH & Co. KG is accompanied by a disadvantage. This eliminates the otherwise possible option for a partnership of a tax-free property sale after the expiration of the ten-year speculative period. Should our example client Heribert Häuser decide in the future for such a sale, he would be taxable under these circumstances. However, the commercial character of GmbH & Co. KG is optional according to § 15 paragraph 3 number 2 EStG. This means that Heribert Häuser can commercially mint its GmbH & Co. KG ten years before the sale and thus prepare the tax-free sale. Surely he must ensure that the tax advantage he receives from the tax-free sale of the real estate from his GmbH & Co. KG is greater than the cumulative depreciation over the period of ten years. But this can usually be estimated very well and usually assumed.

Write off properties twice and tax them favorably with a GmbH

Should it turn out, however, that the rental income despite the high depreciation caused by the commercially oriented GmbH & Co. KG quite high taxes, Heribert Häuser can also decide after some time to convert his limited partnership into a GmbH. Such a real estate GmbH can save trade tax by means of an extended land shortening pursuant to § 9 no. 1 sentence 2 GewStG. And according to the regulations of the KStG, only 15% tax is then incurred when a real estate rental by a GmbH. In the case of a private rental or through a partnership such as GmbH & Co. KG, however, up to 42% of income tax can be incurred. It is therefore worthwhile to deal with the question of further tax optimization.

Write off properties twice – our conclusion

As you can see from our example, we have several design variants available to optimize real estate for tax purposes. The option to double depreciate real estate can even be combined with other tax benefits. In any case, all other options are available for further tax optimization beyond the commercial real estate GmbH & Co. KG.