Taxing rental income: the overview for landlords (2026)

Do I have to tax my rental income?

Yes. As soon as you let housing for payment, you earn Einkünfte aus Vermietung und Verpachtung (income from renting and leasing) within the meaning of § 21 EStG — and it is subject to income tax. The load-bearing fact first: what is taxed is not the rent that lands in your account but your surplus. That is rental income minus Werbungskosten (income-related expenses, § 9 EStG). You declare this surplus on the Anlage V (rental income schedule) of your income tax return.

There is no separate tax rate for rental income. The surplus is added to your other income and taxed at your personal Einkommensteuersatz (income tax rate). What you pay therefore depends on your total taxable income.

The mechanics of the form are covered by a separate guide, filling in the Anlage V correctly. This overview answers the question that comes before it: whether, how and to what extent rental income is taxable at all.

Which rental income is taxable?

Taxable income includes everything that flows to you from the letting (the cash-flow principle):

• the Kaltmiete (cold rent, i.e. rent without ancillary costs),
• the Nebenkosten (ancillary cost) advance payments and any back-payments from the Nebenkostenabrechnung (ancillary cost statement),
• income from co-let garages, parking spaces or furniture.

The passed-on Nebenkosten must be declared in full as income — but they are largely neutralised by the operating costs you actually paid on the expense side.

Is there an exemption threshold?

A genuine Freigrenze (exemption threshold) applies only in one special case: anyone who temporarily sublets part of their own, owner-occupied home and earns at most 520 euros per calendar year need not declare that income (R 21.2 Abs. 1 EStR). If the limit is exceeded by even one euro, the entire amount is taxable — it is a Freigrenze, not a Freibetrag (tax-free allowance).

This 520-euro limit does not apply to the permanent letting of a flat. Here, employees, pensioners and retirees may at most benefit from the Härteausgleich (hardship adjustment): Nebeneinkünfte (secondary income) up to 410 euros a year stay tax-free, and between 410 and 820 euros they are taxed at a reduced rate. But as soon as the letting is set up as a lasting source of income, it belongs on the Anlage V.

Which Werbungskosten can I deduct?

Werbungskosten are all expenses connected with the letting (§ 9 EStG). They reduce your taxable surplus and are the real lever of every landlord's tax return.

Deductible (Werbungskosten)	Not deductible
Building AfA (§ 7 EStG)	Loan repayment / Tilgung (building of equity)
Schuldzinsen (interest share)	the purchase price itself (enters via the AfA)
Erhaltungsaufwendungen, repairs	privately used shares
Nebenkosten not passed on	costs passed on and borne by the tenant
Grundsteuer, insurance, administration

The key rule: the Tilgung (repayment) is not an expense but the building of equity — only the interest share (Schuldzinsen) of the loan is deductible.

How does the AfA work?

The AfA (Absetzung für Abnutzung, i.e. building depreciation) spreads the acquisition or construction cost of the building over its useful life. Under § 7 Abs. 4 EStG these rates apply:

Building / case	Straight-line AfA rate
Residential building, completed from 1925	2 % per year
Residential building, completed after 31.12.2022	3 % per year
Residential building, completed before 1925	2.5 % per year
Denkmal / redevelopment area (special AfA)	increased rates (§§ 7h, 7i EStG)

Only the building share is depreciated. Land does not wear out and is excluded from the AfA — so you must split the purchase price into a building share and a land share.

What happens with a loss?

If Werbungskosten exceed rental income — for example in the early years with high Schuldzinsen, or after a major repair — you have a Werbungskostenüberschuss, that is a tax loss. You can offset this loss against your other income (Verlustausgleich) and so reduce your overall income tax.

Important: Even a loss-making letting must be declared on the Anlage V — the loss only reduces your tax if you report it. This requires an Überschusserzielungsabsicht (intent to make a surplus): if you write losses indefinitely with no prospect of an overall surplus, you risk the Finanzamt (tax office) treating it as Liebhaberei (a hobby) and disallowing the losses.

Common mistakes

• Not declaring passed-on Nebenkosten. They are taxable income — omitting them risks an estimate by the Finanzamt.
• Deducting the repayment as a cost. Only the interest share (Schuldzinsen) of the loan is a Werbungskosten, not the Tilgung.
• Depreciating the land. Only the building share may be depreciated under the AfA.
• Hiding a loss. A Werbungskostenüberschuss reduces your tax only if it appears on the Anlage V.
• Collecting receipts only at filing time. Without records kept all year, repair invoices and payment proofs — and with them deductible Werbungskosten — go missing.

With HausMaus it's simpler

HausMaus records every rent payment and cost receipt per property across the year — Kaltmiete and passed-on Nebenkosten on the income side, Schuldzinsen, repairs, AfA and running costs as Werbungskosten. You upload receipts by photo or file; HausMaus reads out the amount and category automatically and files them in the document vault. At year-end HausMaus turns this into an Anlage-V-ready tax export (also as a PDF, sent straight to your Steuerberater), in which Vermietungseinkünfte (rental income) and Werbungskosten are already separated — without sorting receipts at the deadline.

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