Main idea:
When renting out a property, tax is not applied to the full rental income but only to the net profit, meaning:

Profit = total rental income – deductible expenses (Werbungskosten)

Any expense related to the rented property can be deducted to reduce taxable income.

Examples of deductible expenses:

Expense type – Explanation

• Mortgage interest: Only the interest (Zinsen), not the full installment.

• Maintenance and repairs: Roof repairs, plumbing, painting, windows, etc.

• Property management: Fees for Hausverwaltung companies or shared cleaning services.

• Grundsteuer (property tax): Paid annually to the municipality and fully deductible.

• Shared heating and water costs: Deductible if not charged to the tenant.

• Insurance: Building insurance or liability insurance.

• Advertising: Fees for rental advertisements.

• Annual depreciation (AfA): Building depreciation: 2% of the property value annually over 50 years.

• Tax advisor / notary fees: Steuerberater or notary costs related only to the rental activity.

Practical example:

Item – Annual amount

• Rental income: €12,000

• Loan interest: €2,000

• Maintenance and repairs: €1,500

• Property tax: €400

• Insurance: €300

• Property management: €800

• AfA (2% of €150,000): €3,000

• Total expenses: €8,000

• Net profit: €4,000

→ Income tax is applied only to €4,000.

Important notes:

• Personal-use expenses (if you live in the property) cannot be deducted.

• All invoices and proof must be kept for at least 10 years.

• Large renovation costs may be partially deductible or spread over several years depending on the type of renovation.

• All expenses must be reported in Anlage V in the annual tax declaration.

Key terms:

• Werbungskosten: deductible expenses

• AfA (Abschreibung): depreciation of the property

• Grundsteuer: annual property tax

• Hausverwaltung: property management

• Anlage V: tax form for rental income

Conclusion:
Any necessary expense for maintaining or renting out the property can be deducted from rental income, reducing taxable profit. Deductions are submitted via Anlage V in the annual tax return.

Note:
The editorial team strives to provide accurate information based on extensive research and multiple sources. However, errors may occur or some information may remain unverified. Please consider this content as a preliminary reference and always consult relevant authorities for official guidance.