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buy recreational land with garden house
Do you dream of owning your own recreational plot with a garden house? The good news: The path to achieving this can be supported by tax incentives! Take advantage of the various options to reduce your tax burden and make your dream of a green haven come true. Learn more about your opportunities by contacting us.
Lower the property transfer tax by using separate purchase agreements and purchase price allocation to optimise your initial investment.
Maximise your tax savings by optimising the use of depreciation options (AfA) and the deduction of advertising expenses for rentals. A usage duration report can increase depreciation.
Avoid the speculation tax by observing the 10-year holding period or self-use and take advantage of additional tax benefits for home offices, moving costs, and craftsmen's services.
Overview of the Topic: Recreational Plot, Garden House, and Taxes
Purchasing a recreational plot with a garden house can be more than just fulfilling the dream of your own green space. It also offers intriguing tax planning opportunities that should be utilised. This article provides you with a comprehensive overview of the key aspects, from land purchase tax to depreciation options. We'll show you how to cleverly save on taxes and make the most of your garden paradise. Proper planning and understanding of the tax regulations are crucial to maximise your investment. Also find out how to discover the right recreational plot for you.
Why a Recreational Plot with a Garden House Can Be an Attractive Investment
A recreational plot with a garden house is an attractive investment because it not only offers relaxation and leisure but also financial benefits. By renting out the plot or the garden house, you can generate additional income while benefiting from tax deductions. Additionally, the value of the land may increase over time, allowing for a profit upon future sale. However, it's important to be thoroughly informed about the tax aspects before purchasing, to fully leverage all advantages. Consider also the costs involved in buying a recreational plot with a garden house.
Separate Purchase Agreements for Land and Buildings: Risks and Opportunities
One way to reduce land transfer tax is to sign separate purchase agreements for the land and the building (garden house). This is particularly interesting if you buy the land first and have the garden house built later. It is important that the contracts are legally independent of each other. Sparkasse Immobilien provides information on the possibilities for optimizing land transfer tax.
Ensure Independence of Contracting Parties
To ensure the independence of the contracts, you should make sure that the seller of the land and the builder of the garden house are not the same or in a close business relationship with each other. Otherwise, the tax office may consider the contracts as a unit and levy the land transfer tax on the total value. Volksbank Raiffeisenbanken points out that the independence of the contracting parties is crucial.
Staggering the Contracts Over Time
Another important point is the staggering of the contracts over time. There should be a certain period of time between the purchase of the land and the conclusion of the construction contract for the garden house to strengthen the impression of an independent decision. A stagger of about six months can be sensible here.
Reduction of the Assessment Base through Purchase Price Allocation
Another way to reduce the land transfer tax is to allocate the purchase price for the land and the garden house, and list movable items (e.g., furniture, kitchen) separately. Since the land transfer tax is only levied on the value of the land and the building, you can reduce the tax burden by deducting the value of the movable items.
List Movable Items (e.g., Furniture, Kitchen) Separately
Ensure that the movable items are detailed and valued in the purchase agreement. The tax office will scrutinize this. It is advisable to seek advice from a professional to avoid mistakes. ImmobilienScout24 offers tips on purchase price allocation.
Exceptions and Allowances for Land Transfer Tax
There are also certain exceptions and allowances for land transfer tax that you can take advantage of.
Inheritance and Gifts
In the case of inheritance or gifts, land transfer tax is usually not payable. However, inheritance or gift tax may apply, which may be lower than the land transfer tax.
Low Assessment Base
In some federal states, there are allowances for low assessment bases. If the value of the land is below this threshold, no land transfer tax is payable. Get informed about the applicable regulations in your federal state.
Linear Depreciation (AfA) for Buildings: Percentages and Year of Construction
The linear depreciation (AfA) allows you to claim the value of the garden house for tax purposes over its useful life. The depreciation rate depends on the year the building was constructed.
Buildings Before 1925
For buildings constructed before 1925, the depreciation rate is 2.5 percent per year.
Buildings Between 1925 and 2022
For buildings constructed between 1925 and 2022, the depreciation rate is 2 percent per year.
Buildings After 1 January 2023
For buildings constructed after 1 January 2023, the depreciation rate is 3 percent per year. The VLH (Vereinigte Lohnsteuerhilfe e.V.) provides detailed information about depreciation rates.
Declining Balance Depreciation: An Option for New Builds?
For new builds, there might be the possibility of declining balance depreciation. This allows you to claim higher depreciation amounts in the first few years.
Requirements and Application Period
The declining balance depreciation is subject to specific requirements and application periods. The construction start or purchase contract must be between 1 October 2023 and 30 September 2029.
Switch to Linear Depreciation
After a few years, it may be sensible to switch from declining to linear depreciation, as the linear depreciation amounts can then be higher.
Special Depreciation for New Rental Housing
If you rent out the recreational plot with a garden house, you may be eligible for a special depreciation for new rental housing.
Conditions and Scope of Funding
The special depreciation allows you to write off an additional 5 percent of the acquisition and production costs in addition to linear depreciation. However, this is subject to certain conditions, such as meeting specific energy standards.
Useful Life Appraisal: Increasing Depreciation Through a Shortened Useful Life
A useful life appraisal can potentially allow you to increase depreciation by proving a shorter useful life of the garden house.
Requirements for the Appraisal
The appraisal must be prepared by an independent expert and realistically assess the actual useful life of the garden house.
Caution: Tax Office On-Site Inspection
Be aware that the tax office increasingly conducts on-site inspections to verify the information in the appraisal. It is therefore important that the appraisal is well-founded and comprehensible. ImmobilienScout24 points out that the tax office scrutinises the appraisals closely.
Deductibility of Advertising Costs for Letting and Leasing
If you rent out your leisure property with a garden house, you can claim a variety of advertising costs for tax purposes. These reduce your income from letting and leasing, thereby lowering your tax burden.
Loan Interest
Loan interest for financing the property and the garden house is deductible as advertising costs.
Depreciation (AfA)
The previously mentioned Depreciation (AfA) can also be claimed as advertising costs.
Operating Costs (not passed on to tenants)
Operating costs that you do not pass on to tenants are also deductible.
Maintenance and Renovation Costs (Maintenance Expenses)
Maintenance and renovation costs (maintenance expenses) can also be claimed as advertising costs.
Administrative Costs
Also, administrative costs, such as those for a property manager, are deductible.
Broker's Commission
If you hire a broker for the rental, you can claim the broker's commission as advertising costs.
Travel Expenses
In addition, travel expenses incurred in connection with the rental are deductible.
Insurance Premiums
Insurance premiums for building and liability insurance can also be claimed as advertising costs.
Advertising Costs
Advertising costs for the rental are also deductible. ImmobilienScout24 offers a comprehensive list of deductible costs for rental.
Immediate Deduction of Maintenance Costs
Certain maintenance expenses can be immediately deducted as advertising costs.
Repairs to Roof, Facade, Heating
This includes, for example, repairs to the roof, facade, or heating.
Energy Renovation: Tax Incentives for Owner-occupied and Rented Properties
There are special tax incentives for energy renovations, both for owner-occupied and rented properties.
Deduction Over Three Years
The costs of energy renovations can be spread over three years and deducted from taxes. ImmobilienScout24 provides information on the tax benefits of energy renovations.
Home Office: Requirements for Deduction
If you use your holiday property with a garden house as a home office, you may be able to claim the costs for tax relief under certain conditions.
No other workspace available
A requirement for this is that no other workspace is available.
Centre of professional activity
Moreover, the garden house must be the centre of your professional activity.
Proportional calculation of costs (depreciation, loan interest, energy costs, insurance, additional costs)
You can partially deduct the costs of the office by relating the area of the office to the total area of the garden house. Deductible costs include, for example, depreciation, loan interest, energy costs, insurance and additional costs.
Professional Relocation: Deductibility of Moving Costs
If you move for professional reasons to live closer to your holiday property with a garden house, you may be able to claim the moving costs for tax relief under certain conditions.
Shortening of the commute
A requirement for this is that your commute is significantly shortened by the move.
Transport costs, registration fees, school change costs
Deductible costs include, for example, transport costs, registration fees and school change costs for your children.
Domestic Services and Tradesman Services: Tax Benefits for Renovation and Garden Maintenance
For domestic services and tradesman services that you use in connection with your holiday property with a garden house, you can take advantage of tax benefits.
Cleaning, gardening, childcare
This includes, for example, cleaning, gardening, and childcare.
Tradesman services (renovation, maintenance, modernisation)
Also, tradesman services for renovation, maintenance, and modernisation can be claimed for tax relief.
Important: Correct invoicing and non-cash payment
It is important that you receive a correct invoice and make the payment non-cash (e.g., by bank transfer). Volksbanken Raiffeisenbanken provide information on the deductibility of domestic services and tradesman services.
Speculation period: Observe the 10-year waiting period
If you sell your recreational property with a garden house, you may be liable to pay speculation tax. This is the case if you sell the property within ten years of purchase.
Exception: Personal use during the sales year and the two previous years
An exception to this rule applies if you used the property yourself during the sales year and the two previous years. In this case, no speculation tax is due.
Business tax: When is the sale considered a commercial activity?
In certain cases, the sale of a recreational property with a garden house can be classified as a commercial activity.
More than three sales within five years
This is the case, for instance, if you sell more than three properties within five years. In this scenario, you must pay business tax. Sparkasse Immobilien highlights the risk of business tax due to frequent sales.
Revaluation of Properties: Impact on Property Tax
The property tax reform from 2025 involves a revaluation of all properties in Germany. This may also affect the property tax for your recreational property with a garden house.
Declaration for Determining the New Property Tax Value
In 2022, all property owners were required to submit a declaration for determining the new property tax value. Based on this declaration, the new property tax is calculated.
Complexity of Property Tax Calculation (before reform)
The calculation of property tax is complex and depends on various factors.
Location, Tax Office, Multiplier, Historical Factors
These include, for example, the location of the property, the responsible tax office, the municipality's multiplier, and historical factors. Sparkasse Immobilien provides information on the complexity of property tax calculation.
Deductibility of Notary Fees: Distinction Between Building and Land
Even with the financing of your leisure property with a garden house, there are tax aspects to consider. You may be able to claim notary fees as tax-deductible.
Notary Fees Related to Financing as Deductible Business Expenses
Notary fees incurred in connection with financing can be deducted as business expenses.
Registration of Mortgages
This includes, for example, expenses for mortgage registration. The VLH (Vereinigte Lohnsteuerhilfe e.V.) provides information on the deductibility of notary fees.
Summary of Key Tax Tips
Purchasing a leisure property with a garden house offers a variety of tax planning opportunities. Use these to reduce your tax burden and make the most of your garden paradise.
Reduce property transfer tax: Utilise separate purchase agreements and allocation of purchase price.
Optimise depreciation: Choose linear or declining balance depreciation, have an expert lifespan assessment prepared.
Maximise deductible expenses: Claim all deductible costs when renting out.
Utilise additional benefits: Deduct home office, moving costs, and tradesman's services.
Avoid speculation tax: Observe the holding period or prove self-use.
Importance of Professional Advice from Tax Advisors and Lawyers
Tax regulations are complex and constantly changing. It is therefore advisable to seek advice from a tax advisor and a lawyer to avoid mistakes and make the most of all advantages. The Thymian Partners provide advice on tax benefits for property purchases.
State subsidies and tax benefits offer you an excellent opportunity to realise your dream of a leisure property with a garden house. Whether it's a new build or the renovation of an existing property, the available grant programmes and tax advantages make the purchase attractive and financially achievable.
With a multitude of tax benefits, there are numerous ways to reduce costs. We offer you comprehensive advice and support in selecting the right property, meeting all requirements, and navigating complex tax regulations.
By choosing a leisure property with a garden house, you are investing in your future. Not only do you reduce your tax burden, but you also create a place of relaxation and rejuvenation.
Now is the perfect time to explore the tax benefits for your project. Contact us today to start your personalised consultation. Register for free and receive an immediate first assessment of the tax benefits for your property.
The Sparkasse Immobilien provides information on ways to optimise land transfer tax and the risks of trade tax with frequent sales.
The Volksbank Raiffeisenbanken point out that the independence of the contracting parties is crucial and provide information on the deductibility of household-related services and craftsman services.
The VLH (Vereinigte Lohnsteuerhilfe e.V.) offers detailed information on depreciation rates and informs about the deductibility of notary fees.
Thymian Partners offer advice on tax benefits when purchasing property.
What tax benefits does purchasing a leisure property with a garden house offer?
The purchase offers various benefits, including the depreciation of the garden house (AfA), the deductibility of advertising expenses when renting, and the possibility to reduce property transfer tax.
How can I reduce property transfer tax when purchasing a leisure property with a garden house?
You can reduce property transfer tax by drawing up separate purchase contracts for the land and the garden house and listing movable items separately in the purchase contract.
What depreciation options are available for a garden house?
There is the linear depreciation (AfA), with rates depending on the year of construction (2.5% before 1925, 2% between 1925 and 2022, 3% from 2023 onwards). For new buildings, declining balance depreciation may also be applicable.
What advertising expenses can I claim when renting out a leisure property with a garden house?
Deductible advertising expenses include loan interest, depreciation (AfA), operating costs, maintenance and renovation costs, administration costs, brokerage fees, travel expenses, and insurance premiums.
What is the speculation period and how can I avoid it?
The speculation period is 10 years. If you sell the property within this period, speculative taxes apply, unless you have used the property yourself in the year of sale and the two preceding years.
What should be considered regarding the property tax reform?
The property tax reform from 2025 leads to a revaluation of all properties. Keep informed about its impact on your leisure property and review your declaration for determining the new property tax value.
Can I deduct the costs of a home office in the garden house for tax purposes?
Yes, if no other workplace is available and the garden house is the centre of your professional activities, you can partially deduct the costs.
What role does professional advice play when buying a leisure property with a garden house?
A tax advisor and a lawyer can help you avoid mistakes, make the most of all tax benefits, and understand the complex tax regulations.
