Refinancing - Tax Consideration?

Hello,

we are currently in the process of finishing the construction of our single-family house (expected to be completed by December/January).

For the financing, we have a variable component that was supposed to be paid off with the sale of our condominium, in which we still live.

We were advised to list the apartment only after the shell construction was completed. In hindsight, this was not a good decision; it has been on the market since summer, but the interest is currently very low for understandable reasons.

Now I had the following idea: there is still a loan from 2017 with 1.45% interest running on the condo for just under 10 years. If we can keep the apartment and manage to structure the planned interim financing long-term (with a mortgage on the condo, ideally also 10 years so that both loans end at the same time and can be refinanced), would the interest on both ongoing loans on the condo be tax-deductible as advertising expenses if the apartment is rented out? We will talk to both banks that might be involved soon regarding the conditions. However, since the interest portion of the new loan will be comparatively high, the deduction of this as advertising expenses would be very desirable.

I will definitely ask a tax advisor, but I have heard from friends that the deduction as advertising expenses is questionable… to what extent is the use of the loan relevant?

If anyone here already has experience or is knowledgeable, I would be very grateful for input.

would the interest on both loans for the condominium be tax-deductible as income-related expenses if the apartment is rented out?

But you do know what income-related expenses are, right? Income-related expenses depend on your employment, meaning all expenses you incur and need for your job. They have nothing, absolutely nothing to do with your living comfort and its financing or costs (if we exclude the expenses from home to work).

But you do know what Werbungskosten are, right? Werbungskosten depend on your employment activity, meaning all expenses you have and need for your activity.

Correct, and in this case the "activity" is renting out a property (i.e., the condominium). As far as I understand. I have to pay tax on the rental income, so you can deduct the costs (interest, but not repayment) of the activity as Werbungskosten. Maybe I have misunderstood something :-)

Right, and in this case the "activity" is the rental of a property

No. It is not the execution of a profession or an employee activity. You have to be employed somewhere.

Nevertheless, interest costs of a rented property can be counted as costs against the income from the rented property.

Nevertheless, interest costs of a rented property can be counted as expenses against the income from the rented property.

But this is about advertising expenses…, and the original poster is hoping a lot from the new financing (for owner-occupied house) because the interest is higher.
His rental interest can basically be deducted, but rental income must also be taxed.