Subletting - When Do You Pay Taxes?
You pay taxes on income from rentals via internet platforms if:
- your rental income exceeds the exemption limit
- your total income exceeds the basic tax-free allowance
- the sublease is commercial
You only tax your profits, not the entire income from the sublease.
Ensure that you subtract your expenses from your income. These would include your rental share, fees for the online platform, or craftsman costs if incurred due to the subletting.
Keep the receipts for these expenses. For example, if you pay a housekeeper to clean the rented rooms, only bank transfers are recognised for tax purposes. You are not tax-deductible on receipts for cash payments.
By the way:
If you pay taxes for subletting, you can deduct the expenses incurred in connection with the rental as income-related expenses.
No Taxes Till the Exemption Limit:
The exemption limit for rental income is 520 Euros. You do not have to state income up to this limit in your tax return. However, this only applies to owners who temporarily rent out their owner-occupied living space and tenants who only sublet part of their apartment.
Your Income and the Basic Tax Allowance:
If your total income, including wages, other income, and deductible amounts, are below the basic allowance, you do not have to pay any taxes.
In 2018 this was 9,000 Euros for singles and 18,000 Euros for married people. For 2017 this was 8,820 Euros for singles and 17,640 Euros for married people.
No Intention of Profits
Your income will also not be taxed if the tax office decides that you don’t intend to make profits on your subletting. If the tax office sees no intention to sublet your sublet, you do not have to pay tax on the income, but you cannot deduct any losses from other income subleases.
If you withhold your income or do not submit a tax return, this is considered tax evasion! Tax offences are punished retrospectively for up to 10 years.
When Are Commercial Taxes Due?
Typically, your rental income is not considered commercial. However, as soon as you provide unusual special services in addition to pure rental, it becomes subject to trade tax.
Some of the unusual special services include round-the-clock staff, a breakfast menu, or daily room service. The cleaning or provision of bed linen and towels is not included.
However, there is also an allowance for trade tax. This amounts to 24,500 Euros for 2017.
Value-Added Tax (VAT):
If you have a high income from subletting, you have to pay sales tax in addition to income tax. This applies if you earned more than 17,500 Euros in the previous year and more than 50,000 Euros in the current one. If you are below these amounts, you can use the small business scheme and not pay sales tax.
Airbnb income in tax return
You enter income from renting and leasing in Appendix V.
If you pay a tax on the income, you can also deduct income-related expenses.
Deductible advertising expenses when renting include:
- Costs for purchasing your house or apartment
- Renovation and maintenance costs
- Additional costs such as heating, water, property tax
- Annual depreciation for the acquisition or production costs
Calculation of Additional Costs
- Total operating costs of the apartment / (365 x days of renting) = additional costs per day of renting
- Additional costs per rental day x number of square meters of the rented living area
The utility bill and your calculation are sufficient proof of additional costs when subletting.
Permission From the Landlord
In addition to taxes, you need to observe tenancy law when subletting. According to §540 BGB, you are not allowed to sublet your apartment without your landlord’s permission.
If your landlord has permitted you to sublet, this does not imply that subletting to tourists daily is permitted (BGH judgment of January 8, 2014, Az. VIII ZR 210/13). You need explicit permission from your landlord for frequent rentals over shorter periods of time.
If you do not clarify this properly in advance and the landlord discovers you subletting, he can terminate you without notice.
In some federal states, there are now also bans on misappropriation, e.g. in Berlin and Hamburg. Not only must the landlord’s permission be obtained, but also the permission of the competent authority. However, there are differences in the severity of these regulations from city to city.