Taxing rental income: what is really taxable
How to work out the surplus from letting, which is the part that is taxed, and declare it on the Anlage V (rental income schedule).
Only the surplus is taxed, at your personal tax rate. The surplus is your rental income minus your Werbungskosten (costs of letting). Declare all income and costs on the Anlage V, even if the result is a loss.
How to work out the tax on rental income
The calculation is simpler than it sounds. What matters is that you list all your income and all your costs.
- 1
Add up your income
Base rent plus the Nebenkosten (service charges) your tenants pay count as income.
- 2
Deduct your Werbungskosten
Deduct the actual costs of letting from that income.
- 3
Claim the building AfA (depreciation)
The AfA is normally 2% of the building's share of the purchase price a year. It is 3% if the building was finished after 31 December 2022 and 2.5% if it was finished before 1925.
- 4
Deduct loan interest only
Only the interest on your loan counts, not the repayments.
- 5
Apply your personal tax rate
Rental income has no tax rate of its own. The surplus is added to your other income.
- 6
Enter everything on the Anlage V
Declare all income and costs on the Anlage V, even if the result is a loss.
Why this matters
Under § 21 EStG, rental income is income from renting and leasing. What is taxed is the surplus after you deduct your Werbungskosten, not the rent that lands in your account.
General information, not legal advice.
Frequently asked questions
How much tax do I pay on rental income?
Rental income has no tax rate of its own. The surplus is added to your other income. Your personal rate in 2026 is between 0 and 45%, plus Solidaritätszuschlag (solidarity surcharge) and, where it applies, Kirchensteuer (church tax).
What happens if letting the flat makes a loss?
If the letting makes a loss, you offset the loss against your other income, as long as you declare it on the Anlage V. If there is no lasting prospect of a surplus, the Finanzamt (tax office) can treat the letting as Liebhaberei (a hobby) and disallow the loss.
Is there a tax-free allowance for rental income?
No, rental income has no tax-free allowance. A tax-free limit of €520 a year applies only to temporarily subletting part of your own home. All other rental income goes on the Anlage V.
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