4 ms·

Would it be legal to partner with a friend and rent houses to each other ?

valzam 6y ago
The problem is that you need to charge market rate, which the state then taxes as income. I would think it's unlikely to save you money. (If you don't charge market rate the tax office will either assume it's a gift and tax the renter on the rent saved or assume a market rate for income tax purposes)
- archi42 6y ago
  IANAL, but I did some research for Germany: Assuming you need a bank loan to buy your house (and assuming the bank plays along), it seems you're able to deduce the interest on the loan. Same holds for anything you perform to increase the value of the house (e.g. new roof). Now of course if the company pays e.g. 1000 Euro per month for the loan(s), it has to charge the tenants (=me & my SO) more than that plus taxes. The question is now if the effective tax rate can be pushed down to zero% by deducing the interest. As for the companies earnings, maybe that money could be "reinvested" into the house (better WiFi), so that MIGHT just be as good as putting some money aside. Or you actually buy another house for renting out. Obviously it's a good idea to talk about this to a tax advisor. For me this is only a Gedankenexperiment ;-)
  - valzam 6y ago
    I suppose then there is the whole thing about a company having to have a profit motive to be treated as a company. Otherwise it's 'Liebhaberei' and any income/cost does not have an impact on your taxes. https://www.vlh.de/wissen-service/steuer-abc/liebhaberei-was-ist-das-und-werden-dafuer-steuern-faellig.html https://www.vlh.de/wissen-service/steuer-abc/liebhaberei-was... If you buy another house to rent out that might prevent this. But the other thing as well is who benefits from the houses? Because now your friend will own the house you like and vice versa. You probably cannot put in any provisions to ensure your friend will at some point get ownership of his house.

The problem is that you need to charge market rate, which the state then taxes as income. I would think it's unlikely to save you money. (If you don't charge market rate the tax office will either assume it's a gift and tax the renter on the rent saved or assume a market rate for income tax purposes)

archi42 6y ago
IANAL, but I did some research for Germany: Assuming you need a bank loan to buy your house (and assuming the bank plays along), it seems you're able to deduce the interest on the loan. Same holds for anything you perform to increase the value of the house (e.g. new roof). Now of course if the company pays e.g. 1000 Euro per month for the loan(s), it has to charge the tenants (=me & my SO) more than that plus taxes. The question is now if the effective tax rate can be pushed down to zero% by deducing the interest. As for the companies earnings, maybe that money could be "reinvested" into the house (better WiFi), so that MIGHT just be as good as putting some money aside. Or you actually buy another house for renting out. Obviously it's a good idea to talk about this to a tax advisor. For me this is only a Gedankenexperiment ;-)
- valzam 6y ago
  I suppose then there is the whole thing about a company having to have a profit motive to be treated as a company. Otherwise it's 'Liebhaberei' and any income/cost does not have an impact on your taxes. https://www.vlh.de/wissen-service/steuer-abc/liebhaberei-was-ist-das-und-werden-dafuer-steuern-faellig.html https://www.vlh.de/wissen-service/steuer-abc/liebhaberei-was... If you buy another house to rent out that might prevent this. But the other thing as well is who benefits from the houses? Because now your friend will own the house you like and vice versa. You probably cannot put in any provisions to ensure your friend will at some point get ownership of his house.