Background:
Travel expenses to a rental property are generally deductible as income-related expenses within the income from letting and leasing at the kilometers driven and 0.30 euros per kilometer.
Current BFH case law:
In its recent ruling of 1 December 2015 (Az. IX R 18/15), the BFH held that the deduction of expenses for trips to a rental property within the income from letting and leasing is limited to the distance allowance if the property constitutes the locally fixed center of a letting activity that is permanently aimed at generating a surplus.
This means that landlords who have established a regular place of activity outside their home in connection with their letting activity may only deduct the travel costs as trips between home and place of activity under the distance allowance (i.e., for the one-way trip, not per kilometer driven).
According to the BFH, a regular place of activity at the rental property is always to be assumed if, based on an overall assessment of the circumstances of the individual case, the qualitative and quantitative center of the entire activity of the taxpayer relating to that property and directed at generating income is located there.
In the case at hand, a regular place of activity was assumed because the regular trips—165 to one property and 215 to another—indicated this. In addition, extensive administrative, maintenance, monitoring, and care activities were carried out at the property.
Practical note:
In most cases, rental properties are not visited by the taxpayer on a daily basis, but at intervals for inspection purposes, viewings when tenants change, to read meters, or to meet with tradespeople.
Moreover, no separate office is required for "normal" letting activity. Therefore, in these cases, a center of the letting activity is not to be assumed, and travel expenses can be claimed at 0.30 euros per kilometer driven—as before.
See also the published press release of the BFH dated 20 April 2016.
Frequently asked questions
Frequently asked questions
How are travel expenses to a rental property generally deductible as income-related expenses?
Travel expenses to a rental property are generally deductible as income-related expenses (Werbungskosten) under income from renting and leasing, based on the actual kilometres driven at €0.30 per kilometre. This applies to both directions (outbound and return trip). The requirement is that the trips serve the purpose of generating rental income.
When are deductible expenses for rental income limited to the commuter allowance?
According to the BFH ruling of 01.12.2015 (IX R 18/15), the deduction is limited to the commuter allowance (Entfernungspauschale) if the rental property constitutes the fixed center of a rental activity designed for sustained income generation. In this case, the property qualifies as a regular place of activity, and only the one-way distance may be claimed.
When does a rental property qualify as a regular place of work?
A regular place of work exists if, based on an overall assessment, the property constitutes the qualitative and quantitative center of the rental income-generating activity. In the case decided by the BFH, 165 and 215 annual trips respectively, together with extensive administrative, maintenance, monitoring, and upkeep activities, supported this conclusion.
How are travel costs deductible for only occasional trips to a rental property?
If rental properties are visited only at intervals for inspection purposes, viewings, meter readings, or meetings with tradespeople, the property does not constitute the center of the rental activity. In these typical cases, travel costs may still be claimed at €0.30 per kilometer actually driven (round trip).
What role does a separate office play in determining the principal place of activity?
For typical private rental activities, no separate office at the property is required. If such infrastructure is lacking and visits are limited to occasional inspection or administrative trips, there is generally no fixed place of activity, and the deduction is therefore not restricted to the commuter allowance (Entfernungspauschale).