In the first part of our series on looking after your dream home, we explained that a home also carries various obligations and tasks after you have moved in. As land owners, there are some tax implications that you should be aware of, since the purchase of a home will affect your taxable assets and income. The following basic principles are essential for determining your tax liability:
1. Market value
The official market value of your property is counted as an asset, whereas the liabilities shown can be deducted.
2. Rental value
The rental value of an apartment or residential property that is used by the owner is taxable as income. This value is based on the amount you would pay in rent as the owner for a similar object at the same location. If you live in your own home, as a rule this official rent value is used the basis for your tax calculation. The interest on borrowed capital and maintenance costs can be deducted from the rental value for the tax calculation. In addition, the rental value is recorded — taking into account all deductions — from the day you move into your home and is charged ‘pro rata temporis’ (i.e. at a rate proportional to the time allotted).
3. Maintenance costs
When deducting maintenance costs, you have two options: you can either do this at a flat rate or on the basis of the actual expenses. For each tax period, you have the option of choosing the flat-rate deduction or the deduction of the actual costs.
4. For condominium ownership: taxation of fund assets
The owners of the renovation fund are the condominium owners at the ratio of the value of their properties. Accordingly, they are also subject to capital gains tax. If this capital is invested in a manner that accrues interest, each of the condominium owners is liable to pay income tax. If withholding taxes have been deducted from the income from the property, the condominium owners can request that it be returned to their asset statements each quarter. For this, the condominium’s administrator must issue a corresponding certificate.