The annual adjustment or renovation must be made or commissioned and paid for by the obligated person himself in order for the deduction to be made as set out here. In the case of a renovation commissioned by a housing company or a real estate company, the costs of which are charged to the shareholder as consideration, the fees and loan installments paid by the taxpayer are deducted as described in section 3.8. Remuneration below.
The annual correction concerns, inter alia, the following situations:
- The floor material is replaced by a floor material of a similar level
- The walls are painted or wallpapered
- Kitchen cabinets will be remodeled
- Windows or doors are replaced
Basic Improvements include property expansion, Alterations, renovations and other similar measures. The renovation differs from the annual renovation in that the renovation expands or changes the building to a higher standard. Basic Improvements include, for example, Converting a cold storage space into a sauna space or building a swimming pool into a former storage space.
Depending on the situation, renovation costs are added to the non-depreciable acquisition cost of a building or apartment or deducted as depreciation from rental income.
Extensive renovations often involve both a major overhaul and an annual overhaul at the same time. In this case, the costs of the renovation must be divided into the costs of the renovation and annual repairs according to the quality and extent of the renovation. The nature of the renovation is not decided on the basis of the size of the renovation costs alone, as the annual repair costs may be higher than the renovation costs. If the taxpayer does not determine the distribution of expenditure on renovation and the annual repair expenditure or the allocation of expenditure cannot be determined otherwise, the proportions are assessed on a percentage basis.
Expenditure on renovation of a condominium straight-line depreciation
Renovation costs for a leased Condominium cannot be deducted from rental income as annual expenses. In principle, renovation costs are added to the acquisition cost of the apartment. However, according to the case law, renovation costs for a rented condominium are so-called long-term costs that can be deducted at the taxpayer’s request as equal annual depreciation (straight-line depreciation) over their probable useful life. However, capital improvement expenditure is always deducted as equal annual depreciation over 10 tax years if the probable useful life of the expenditure is longer than 10 years. You can take the consultation of taxfyle in this matter.
The elimination of straight-line Improvements as straight-line depreciation presupposes that the improvement is made or commissioned and paid for by the taxable person. In addition, the taxable person must claim a reduction in the cost of major Improvements as straight-line depreciation.