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German Taxes On Property: Rental Income And Capital Gains

How do taxes affect income from renting property back home?

Under German tax rules, the expat can balance interest payments on a mortgage.   It consists of a 2% annual depreciation on the original purchasing price of the property and any additional expenses in relation to the property against the rent received.   Normally the expat ends up with a negative figure for German tax purposes.

Is a capital gain from selling the house back home relevant for German taxes?

Normally, a capital gain from a property outside Germany is taxed in the country in which the property is located.  Germany will not tax on capital gain but will take it into consideration when it comes to determining the German income tax rate.

Buying a house in Germany to rent it out

The expat can offset against the rental income by interest payments on the mortgage and 2% annual depreciation on purchase price of the building. In most cases this will result into a negative rental income for tax purposes.   Negative rental income can act as an offset against the salary.  This applies if the expat has two incomes coming from Germany.

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