Who leases real estate, hereby earns income from renting and leasing - this is how the income tax law regulates. According to § 21(2) EStG, a reduction of the so-called advertising cost deduction takes place in the case of reduced rental, i.e. rental far below the local market rent. Depreciation, ancillary costs and co. are then only proportionally offset against the income. For luxury properties, however, certain peculiarities apply – because the Bundesfinanzhof (BFH) regularly states that no local rental can be determined here.

1st Rental and lease: Who earns corresponding income?

Real estate is a classic component of private asset building and private asset management. They serve – unless they are used for own residential purposes – in practice usually as an investment of private individuals. The same applies to undeveloped land if a lease is made, for example, for commercial or storage purposes. These principles also apply to luxury properties, i.e. residential buildings with a special value, for example by location, size and equipment.

Income from the letting and leasing of real estate is income according to § 21 (1) sentence 1 number 1 EStG. They belong to the types of surplus income, so that taxpayers have to determine the surplus of income via the advertising costs (§§ 8 and 9 EStG). The amount thus calculated is subject to the private income tax rate, which – including solidarity surcharge and church tax – can be up to 50%. The inflow and outflow principle of § 11 (1) and (2) EStG applies.

If the rental of real estate takes place commercially, there is no income from rental and lease pursuant to § 21 (3) EStG. Because here an attribution to the other, usually commercial or freelance, income must be made. “Classic” use cases for § 21 paragraph 3 EStG are for example: