In its ruling of 11 December 2012 (Az. IX R 14/12), the BFH made clear that letting efforts must be adapted. Landlords are also reasonably expected to make concessions regarding the rent level in cases of long-term vacancy, or to seek more suitable means of marketing. The case concerned a house built in 1983. The plaintiff himself lived on the ground floor, the flat on the first upper floor was only let until 1997, and a room in the attic had been vacant from the outset. For the flat on the first upper floor, the plaintiff regularly placed quarterly advertisements in supra-regional newspapers and took the achievable rent from the respective current rent index (Mietspiegel). For the attic room, a tenant was initially sought in the neighbourhood by means of notices; later, no further action was taken with regard to this room. In his income tax return, the plaintiff regularly claimed negative income from letting and leasing on account of the vacancies (i.e. only deductions for income-related expenses), which the tax office did not recognise. The tax court sided with the tax office; in its current ruling the Bundesfinanzhof shared this view and did not allow the deduction of expenses for the vacant flats.
Frequently asked questions
Frequently asked questions
When does the tax office recognize income-related expenses for long-term vacant rental property?
Income-related expenses for vacant rental properties are only deductible if the owner can prove an intention to generate income. This requires serious and sustained letting efforts. If such intention is missing or the efforts are not adjusted over the years, the tax office will deny the loss deduction.
What requirements does the BFH set for rental efforts in cases of long-term vacancy?
According to the BFH ruling of 11 December 2012 (IX R 14/12), landlords must adapt their efforts when a property remains vacant for an extended period. This includes, in particular, making concessions on the rent level and choosing more suitable marketing channels. Standard measures such as routine newspaper ads at the local market rent are not sufficient in cases of multi-year vacancy.
Are regular newspaper ads at standard rent levels sufficient proof of intent to rent?
No, quarterly ads in national newspapers seeking rent based on the standard rent index are not sufficient in cases of long-term vacancy. The BFH requires an adjustment of strategy, such as rent reductions or alternative marketing channels like brokers or online portals. Otherwise, evidence of a genuine intent to generate rental income is lacking.
What are the tax consequences if all efforts to rent out an apartment are completely discontinued?
If efforts to find a tenant are completely discontinued, the intention to generate income ceases to exist. As a result, the ongoing costs of the vacant premises can no longer be deducted as income-related expenses from rental and leasing income. Negative income will not be recognized by the tax office in such cases.
What are the implications of the BFH ruling IX R 14/12 for owners of vacant properties?
Owners of vacant residential properties must actively document their rental strategy and demonstrably adjust it during prolonged vacancies. Recommended measures include documented rent reductions, engagement of real estate agents, and changes to marketing channels. Without such adjustments, there is a risk that excess income-related expenses will be retroactively disallowed.