Financial planning with a rented apartment

Hi,

we are currently working on the first detailed financing plan for a house.
This also has to take into account an apartment that I already own and that is to be rented out in the future.
Now, I am struggling with the taxes on this topic. I don’t need it to be exact to the Euro here at first, but maybe someone of you knows better how the calculation works and can correct me.

The apartment is in a house that is already over 50 years old. Furthermore, the apartment was transferred to me 6 years ago, and I pay a compensation to the transferors of 3600€ annually.
I have also taken out a loan of 50,000€ for the apartment, which was used for renovation purposes and has not yet been fully repaid.
The annual interest on the loan I assume as an example to be 600€.
Further as an example, the apartment can/should be rented out cold for 12,000€ per year.

Now to the calculation

in the worst case:
My income without renting = 60,000€ gross per year -> for this (tax class 1 no children) 12,525.84€ tax is due
with renting = 72,000€ -> for this (tax class 1 no children) 17,313.48€ tax is due.
That means for the renting I pay a hefty 4,787.64€ in taxes, after all almost 5 monthly rents.

with depreciation:
Here I am not sure. There is no purchase price, so there is nothing to deduct?
Can the compensation payment to the transferors still be deducted, fully or with the 2% rule?
For example, I would leave a kitchen in it, can I still deduct it with 2% over the next 4 years?
I can deduct the annual loan interest
I can also deduct property tax
Additional costs can be deducted, in full?
-> The thing with the additional costs confused me a bit. It is always said that it is taxed on cold rent, but somehow not… Is the calculation here such that you first calculate with additional costs and then the additional costs are fully deducted again? Then it would cancel out.

Ultimately I arrive at
Cold rent income per year: 12,000€
- Compensation payment: x
- Kitchen with 2% (12,000 purchase price / 10 years / 100 * 2): 24€
- Loan interest: 600€
- Property tax: 60€
- Additional costs: x

to be taxed: 11,316€

Am I on the right track like this?
Can I generally assume that without depreciation or without purchase price/investment I cannot claim any significant deductions and have to pay about 5 monthly rents in taxes?

I am not sure about that. There is no purchase price, so there is also nothing to deduct?

What have you actually been doing for six years? From the transfer (a value will also be set in the contract, which, for example, the notary assumes for his costs) 2% on the value minus the land value share.

Can the compensation payment to the transferors still be deducted, fully or with the 2% rule?

What 2% rule for compensation payment? Never heard of it. You probably confuse it with depreciation.
In my opinion, the compensation payment is a permanent burden = income-related expenses. However, the one who receives the payment has to check whether he has to declare it as income. How is it defined in the transfer contract?

For example, I would leave a kitchen in there, can I still deduct it with 2% for the next 4 years?

Is the kitchen rented out? What is its residual value? How old is it? There are certain depreciation rules to observe (kitchen, in my opinion, over 10 years with 10% annually).

I can deduct the annual loan interest

Yes

I can also deduct property tax

No, the tenant pays it. It is a "pure" pass-through via the ancillary costs and directly a "write-off" as income-related expenses.

Ancillary costs can be deducted, in full?

See property tax.

Is the calculation for this such that you first count with ancillary costs and then deduct the ancillary costs again in full? Then it would cancel out.

Yep.

But there are other income-related expenses that cannot be passed through to the tenant. For example, the costs for administration, the rent account, maintenance, trips to the property (to hand over the tenant’s ancillary cost statement), postage costs, etc.

Net rent minus loan interest (and if applicable compensation payment) minus non-pass-through operating/maintenance costs minus depreciation. What remains you tax (at your marginal tax rate).

Can I generally assume that without depreciation or without purchase price/investment I cannot claim any significant deductions and have to pay about 5 months' rent in taxes?

No matter what you do: Every extra euro you earn must be taxed at 42% according to the income tax rate. Just like every overtime hour at work. That is pretty much exactly 5 out of 12 monthly rents. That is simply the nature of things.

Nordanney has already written a few tricks to still improve the calculation.

First of all, thanks for the answers :)

What have you actually been doing for six years? From transfer (a value will also be set in the contract, which e.g. the notary assumes for his costs) 2% on the value minus the land value share.

I have been living in the apartment myself for 6 years.
The market value set for the apartment is €300,000, 2% of which would be €6,000. As I understand it, I cannot claim this because
a) the house is already over 50 years old anyway and the depreciation (AfA) ends after 50 years and
b) I did not pay the market value.

What 2% rule for compensation payment? Never heard of that. You probably confuse it with depreciation.
In my opinion, the compensation payment is a permanent burden = income-related expenses. However, the one who receives the payment must check whether he has to pay tax on it. How is it defined in the transfer contract?

I actually meant the 2% as depreciation. In other words, €3,600 compensation payment (I thought that was my "purchase price") per year results in €72 for depreciation (2%).
I just looked in the transfer contract (called "Überlassung" in the contract). But I only partially understand it. For the transfer, €300 are agreed as a permanent monthly burden until the lifetime of the transferors.
-> This is supposed to serve as basic security for the transferors for old age, but I could not find this explicitly in the contract. I think the transferors had already told me that they have to pay taxes on this.

Is the kitchen rented out? What residual value does it have? How old is it? There are certain depreciation rules to follow (kitchen, in my opinion, over 10 years with 10% per year).

Yes, I would define the kitchen as part of the transfer in the rental contract.
The kitchen is now 6 years old and originally cost €12,000. My calculation for this would be €12,000 / 10 years / 100 * 10 = €120 that I can deduct from taxes.

A kitchen is depreciated over 10 years. If the apartment is rented out, for example, from 01.01.21, you can deduct €1,200 for the year 2021 from your taxes. Regarding a perpetual burden, there is also the possibility to deduct it as special expenses. However, I don't exactly remember the requirements, as this does not occur very often.

The market value for the apartment is set at €300,000, of which 2% would be €6,000. As I understand it, I cannot claim this because a) the house is already more than 50 years old and the depreciation expires after 50 years, and b) I did not pay the market value

The 50 years start anew each time. Even the apartment in a 300-year-old building can be depreciated over 50 years upon purchase. But exclude the land portion. Land is eternal and cannot be depreciated. Where does the market value come from? From an appraisal? Then use it as a basis.