Navigating the tax landscape as a property owner in Germany can be complex — but understanding how rental income is taxed can significantly improve your financial results.
Whether you’re renting out a single apartment or managing a growing portfolio, smart tax planning helps increase your cash flow and avoid overpaying the Finanzamt.
In this guide, we’ll walk you through:
- What counts as taxable rental income
- Which deductions reduce your tax bill
- Common mistakes to avoid
- How tools like Immojourney can streamline your tax process
What Is Taxable Rental Income in Germany?
As a landlord, you must declare all income you receive from tenants during the year. This includes:
- Monthly rent (Kaltmiete or Warmmiete)
- Advance rental payments
- Non-refundable deposits (if used for repairs or damages)
This income must be included in your annual German tax return. The good news: you’re allowed to deduct a wide range of property-related expenses — and these deductions are key to reducing your tax burden.
The Most Valuable Deductions for Property Owners
Germany allows landlords to deduct Werbungskosten (income-related expenses), which directly reduce your taxable rental profit. Here are the most impactful ones:
1. Depreciation (AfA – Absetzung für Abnutzung)
- Residential buildings can be depreciated at 2% per year for 50 years
- Depreciation applies to the building value plus purchase-related costs (notary, land transfer tax, agent fees)
- Land value is not depreciable
With Immojourney, you can calculate and track AfA automatically — no spreadsheets needed.
2. Mortgage Interest (Zinsen)
- Only the interest portion of your loan is deductible — not the principal
- This is often the largest single deduction if your property is financed
- Annual interest statements from your bank are essential for your tax return
3. Repairs and Maintenance (Erhaltungsaufwand)
Fully deductible in the year incurred:
- Plumbing and electrical repairs
- Boiler replacement
- Painting and cleaning the façade
- Fixing broken windows, locks, or doors
Important: Renovations that improve or upgrade the property (like a new kitchen or full remodel) must be depreciated over time rather than deducted all at once.
4. Other Eligible Expenses
- Property management fees (Hausverwaltung)
- Building and liability insurance
- Utility costs covered by you (heating, water, etc.)
- Legal fees, accountant fees, and broker commissions
- Travel expenses for property visits or inspections
All of these reduce your rental profit and therefore lower your tax bill.
Common Mistakes to Avoid
Even experienced landlords make avoidable tax errors. Here’s what to watch for:
- Missing receipts or failing to keep proper documentation
- Misclassifying renovations as repairs (leading to incorrect deductions)
- Forgetting to claim depreciation (AfA) year after year
- Overlooking local tax rules, which can vary by city (e.g., municipal levies in Berlin vs. Munich)
Staying organized is key to avoiding these pitfalls.
Simplify Tax Season with Immojourney
Still tracking your expenses manually in Excel? That approach leads to errors, missed deductions, and frustration at tax time.
Immojourney automates and organizes everything you need for tax filing:
- Transaction Ledger: Track all income and expenses across your portfolio
- Document Vault: Store receipts, invoices, loan contracts, and more
- Depreciation Tool: Auto-calculate AfA per property and export for your Steuerberater
- Tax Summary: Export your entire year in one clean report
Whether you work with a tax advisor or file yourself, Immojourney saves hours of prep time and ensures you don’t leave money on the table.
Final Thoughts: Reduce Your Tax Burden and Keep More Profit
Understanding what’s deductible — and tracking it properly — helps you:
- Boost your net monthly income
- Improve your property’s ROI
- Avoid tax surprises and back payments
- Plan for future purchases with better financial clarity
Smart rental income tax management in Germany is part of smart investing.
Immojourney helps you do it all — automatically.
Start tracking your rental finances the right way. Try Immojourney free.
