Deductible maintenance charges and capital charges
The landlord of a flat can deduct maintenance charges for the period when the flat is for rent. Maintenance charges paid to housing co-operatives for flats that are let out can be deducted from rental income. You can deduct maintenance charges for the months when you receive rental income. Maintenance charges must always be deducted during the year they were paid.
Capital charges include charges for repairs and capital costs. Housing co-operatives typically charge shareholders for repairs by means of monthly capital charges. Shareholders can also pay the whole amount to the housing co-operative in one lump sum.
The deductibility of capital charges depends on how capital charges are recorded in the housing co-operative’s books. Information about whether charges are recorded as revenue or placed in reserve is available from building managers.
- Capital charges that are recorded as revenue in housing co-operatives’ books can be deducted from rental income.
- Capital charges that are placed in reserve in housing co-operatives’ books cannot be deducted from rental income. In these cases, charges are added to buyer’s expenses and taken into account in capital gains when the flat is ultimately sold.
The deductibility of charges is not affected by whether the repairs carried out by housing co-operatives are modernisations or annual repairs.
Example: Pekka’s rental income from his flat in 2020 was EUR 5,000. The entire building was replumbed in the summer of 2020. Pekka’s flat’s share of the costs came to EUR 8,600. Pekka opted to pay the replumbing costs by means of monthly capital charges.
Pekka's maintenance charges were EUR 200 per month and his capital charges for the replumbing were EUR 150 per month, which together amounted to EUR 4,200 across 12 months.
Capital charges are recorded as revenue in the housing co-operative’s books, which means that Pekka can deduct the charges from his rental income. Pekka’s taxable capital gain from letting his flat in 2020 was EUR 800 (EUR 5,000 – EUR 4,200 = EUR 800).
See a list of other rental flat costs that can be deducted from rental income.