Sale price of the property | EUR 1.000.000

Historical Costs | EUR 200,000

Depreciation made between purchase and sale | EUR 150,000

book value at the time of sale | EUR 50,000

Capital gain according to § 4 para. 1 sentence 1 EStG | EUR 950,000

The rental of real estate was and is a lucrative business, because it is not for nothing that the so-called “concrete gold” is regularly mentioned here. Anyone who wants to rent real estate must also deal with the tax peculiarities of this project. In addition to the taxation of rental income, this also affects the choice of the right legal form, because depending on the investment volume and location, the establishment of a real estate GmbH can be expedient. We take a closer look at the most important tax bases and also compare the private with the commercial rental!

First principle: rent real estate as a private person or GmbH?

Landlords or those who still want to become one should deal with the question of the right legal form before building or buying the property. As a rule, leased or leased land is in private property and is transferred from this “out” to other persons. Housing, real estate, built-up and undeveloped land are treated in the same way under tax law. Also the rental of a single condominium is tax law as a transfer of a (small) property.

Alternatively, a corporation is established, classically a Immobilien-GmbH or Immobilien-UG (Entrepreneurgesellschaft). It then pursues the corporate purpose of “management of real estate” and is thereby subject to tax advantages. For example, the extended reduction in business tax, which corporations usually have to pay, works.

Thus, the rental of a property in the corporation is cheaper in the “ongoing business”, but later no tax-free sale is possible. Anyone who wants to rent real estate must weigh these and other advantages and disadvantages against each other in individual cases.

However, the legal form does not initially change the tax principles for the treatment of real estate assets. This is also due to the fact that the Corporate Income Tax Act (KStG) applicable to corporations refers in many places to the “private” Income Tax Act (EStG).

2. rent real estate – Treatment of private property

The majority of German landlords keep their leased properties in private assets. The reason for this is, among other things, the possibility of being able to sell the property tax-free after 10 years. Especially in regions with high added value, § 23 EStG offers attractive design opportunities at this point.

Private landlords earn income from rental and leasing activities covered by § 21 EStG. Taxable is the so-called surplus resulting from the deduction of advertising costs from income.

Natural persons who rent their properties thus bear a higher tax burden over the rental period themselves than would be the case, for example, in the GmbH. “Hintenaus”, however, they save the income tax on arising capital gains.

2.1. Revenue from renting and leasing

The income from working as a landlord includes all cash and non-cash benefits accruing in this context (§ 8 EStG). These are primarily the following amounts of money: