Taxes on Rental Contracts (Mietverträge) in Germany
(Taxation of Rental Income in Germany)
1. Who is required to pay tax on rental income?
Anyone who:
rents out a property (apartment, house, office, etc.) located in Germany, and
receives rental income (Mieteinnahmen)
→ is obliged to file an annual tax return and pay income tax on the profits generated from renting out the property.
Tax is not charged on the full amount of the rent, but only on the profit.
Basic formula:
Taxable profit = total annual rental income – deductible expenses
Type of expense – Deductible? – Examples
Interest on the property loan – Yes
– Zinsen für Immobilienkredit (interest on the mortgage/property loan)
Maintenance and repair costs (Erhaltungsaufwand) – Yes
– window repairs, painting, electrical work, general maintenance
Property management fees / administration costs – Yes
– fees for a Hausverwaltung or professional management company
Property tax (Grundsteuer) – Yes
– paid annually to the municipality / city
Tax advisor or accountant fees – Yes
– if they relate to the rental property
Building insurance (Wohngebäudeversicherung) – Yes
– e.g. fire, water damage, storm, glass damage, etc.
Advertising costs to find tenants – Yes
– advertisements on portals such as ImmobilienScout24, newspaper ads, online listings
Depreciation of the building (Abschreibung – AfA) – Yes
– generally 2% per year of the building value (excluding land)
Rental income is reported in Anlage V (Vermietung und Verpachtung) as part of the annual income tax return (Einkommensteuererklärung).
In practice, no tax may be due if:
the total of
→ profits from rental activities + other income
does not exceed the annual basic tax-free allowance,
e.g. in 2024: 11,604 € per person,
or if you rent to relatives at a reduced rent below the market level,
subject to specific conditions set out in tax law.
Note:
If you rent out a property free of charge or for a purely symbolic amount, this can lead to restrictions on the deductibility of expenses, because the tax office may argue that there is no real intention to generate income.
No – the tenant does not pay any tax directly on the rent.
The tenant only pays:
the agreed rent, and
the ancillary costs (Nebenkosten) according to the rental contract.
The tax obligation lies with the landlord, not with the tenant.
Yes. If the property is rented out via a company rather than as a private individual, different types of tax apply:
Legal form – Applicable tax
Individual (Privatperson)
→ Income tax (Einkommensteuer) on rental income
Company (e.g. GmbH or UG)
→ Corporate income tax (Körperschaftsteuer)
→ plus trade tax (Gewerbesteuer)
→ Depending on the structure and tax planning, there may be potential tax advantages when using a company, which should be assessed with a professional tax advisor.
Mieteinnahmen – rental income
Werbungskosten – deductible expenses related to generating rental income
Anlage V – rental income schedule within the German income tax return
Grundsteuer – annual property tax
Abschreibung (AfA) – depreciation of the building
Vermietung & Verpachtung – rental and leasing (category of income from renting and leasing)
Anyone who receives rental income is required to declare it in their annual tax return.
Tax is levied only on net profit, after deductible costs have been subtracted from rental income.
A wide range of expenses (loan interest, maintenance, insurance, administration, advertising, depreciation) can be deducted.
The tenant does not pay any tax directly – they only pay rent and ancillary costs.
Renting to relatives at reduced rates is subject to special tax rules, which can affect the deductibility of expenses.
The editorial team of the website strives to provide accurate information based on thorough research and multiple sources. Nevertheless, errors may occur or certain details may be uncertain or incomplete.
Therefore, the information in this article should be regarded as an initial reference only. For binding and definitive guidance, you should always consult the competent authorities or a qualified tax advisor.
