Those who rent to relatives do not want to lose their tax advantages. There are a few things to consider.
When parents rent out an apartment to their child or other relatives, this is often done at significantly reduced rents. Of course, they still want to be able to deduct the costs associated with the rental, such as depreciation, maintenance measures or loan interest, in full from the tax.
So that the tax office fully recognizes this, the rent must not be set too low. The rent must be at least 66 percent of the so-called local market rent. This is the basic rent for apartments of a comparable type, location and equipment, including the range of the local rent index plus the costs that can be apportioned according to the operating costs ordinance.
The exact calculation is often debated. It gets even more complicated with furnished apartments. The Federal Finance Court (BFH) has now decided (judgment of February 6, 2018, IX R 14/17) that a furniture surcharge must then be taken into account, which must be in line with the market. This is the case if the surcharge is based on the equipment of the apartment from the rent index.
For example, the local rent according to the rent index can increase if a well-equipped kitchen is available. If the furnishing surcharge cannot be determined from the rent index and, in a second step, no furnishing surcharge that can be realized on the local rental market, the local market rent without furniture must be used. The BFH is of the opinion that the determination of the furniture surcharge on the basis of the monthly depreciation of the furniture provided and the application of a percentage rental yield surcharge are not permitted.
Tip: Due to the possible difficulties, when renting a furnished apartment in particular to relatives, the rent should not be too low. Good for landlords: The average rents in the local rent index also include rents from “old contracts”, which are usually well below the rents for new contracts.