Stricter rules will apply to those who want to declare their rent in their tax return

Tenants who want to use their apartment (partly) professionally and who want to declare rent as an income-related expense, must provide additional information from next year. However, not all residents can make professional use of rental homes or rental apartments.

 

The federal government is planning new measures to make landlords' rental income reports more accurate. Tenants who declare rent as an income-related expense on their annual tax returns must provide additional information.

In concrete terms, this concerns the first and last name , the address and the national register number of the lessor . In addition, the tenant must also specify the address of the rented premises , the total rent amount and the portion that has been deducted as income-related costs .

The bill is still being drafted, but the new obligations apply to both individuals and companies and will take effect from the income tax return next year. If the tenant does not fulfill his obligations, he cannot deduct the rent for tax purposes.

Rent may be part of the actual business expenses. Costs incurred to obtain or maintain professional income may be deducted. It is only interesting to state the actual professional costs if the actual professional costs are higher than the flat-rate allowance. Nothing will change for tenants who accept the cost flat rate.

 

 

Why would the IRS want to know the details of a landlord's rental income?

The taxation of rental income depends on the use of the tenant. If the tenant uses the property exclusively for private purposes, the landlord is taxed according to the cadastral income increased by 40%. When a tenant uses the property for work or if it is rented out to a company, the landlord is taxed on the basis of the actual rental income minus a flat-rate fixed cost of 40%. The taxes based on the cadastral income are significantly lower.

Does the tenant use the building partly for his own use and partly for work (e.g. 80 percent for his own use and 20 percent for work)? If specified in the registered rental agreement, the landlord can use the same split on the return. In other words, the actual rent for the commercial part and the proportional part of the non-indexed cadastral income for the rest. If there is no split in the lease, the tenant must declare the gross rent as if the premises were used entirely professionally. However, this will not happen under the new reporting obligations. The administration does not invoice on the basis of the rental agreement, but on the basis of the data to be supplied by the tenants.

 

Can a tenant claim rent as an income-related expense?

Whether commercial use is allowed is usually stated in the rental agreement. Most rental properties are allowed for purely private use. Most standard contracts contain a ban on commercial use.

If business use is prohibited, the tenant may not declare the rent paid, or part thereof, as a business expense on the tax return. Sometimes tenants do this despite the rental agreement prohibiting this. The tenant's tax inspector can then draw up a form and send it to the landlord's tax inspector. The latter must then check whether the income has been correctly declared. If the landlord does not report the income correctly, he or she may receive a change notice and additional taxes must be paid. The new rule will automate this process.

From now on there will be a clause in the rental contract because the landlord does not know how the tenant will fill in the tax return. If the tenant wrongly claims the rent as a professional expense, the financial consequences can be recovered from him. It is therefore better for the tenant to respect the rental contract in order to avoid very expensive surprises.

 

 

Can the rental agreement be changed for commercial use?

If the tenant wishes to use the rented property for (partial) professional use, an appendix can be attached to the rental agreement. This must be registered in the same way as the rental agreement. In this case, the landlord would do well to ask for additional rent to compensate for the higher tax on the rental income. As a rule of thumb, commercial rent should be about a third higher than personal rent.

For example, a tenant rents an apartment for € 1200 and the tenant wants to use half of it professionally. The professional use is then equal to € 600 of the rent. It should be increased by a third, ie 200 euros. This brings the total rental price to € 1,400.