What counts as rental income

Rental income is income received from allowing another person use your property, vehicle or other assets in return for money or other benefits of monetary value.

Typical sources of rental income include the following:

  • Flats
  • Houses
  • Timeshares
  • Cars
  • Caravans
  • Boats
  • Machinery or equipment

In addition to rent, rental income includes all other payments you receive from your tenant – such as money towards your water bill or rent on your parking space.

Security deposits do not constitute rental income except when used to cover unpaid rent.

Rental income from subletting

Any income from subletting also counts as rental income. Subletting refers to situations where you are yourself a tenant but you let another person use your rental property and charge them rent or a similar consideration in return. Any rent paid by subtenants counts as taxable capital gains for the principal tenant.

Any costs incurred from the tenancy can be deducted from the principal tenant’s rental income. Examples include the percentage of the rent that the principal tenant pays to the landlord for the part of the property that they occupy themselves.

Example: Hanna rents a 65-m2 flat. Her rent is EUR 1,500 per month. Her rent includes electricity and water.

As of 1 March 2018, Hanna has been subletting a 12-m2 room in the flat to Heidi. The girls share the kitchen and the bathroom, which together measure 28 m2. Heidi pays Hanna EUR 700 per month for rent.

Hanna’s rental income for 2018 amounts to EUR 700 x 10 months = EUR 7,000. She can deduct any costs that she incurs from the tenancy. A part of the rent that Hanna herself pays to the landlord counts as costs. Hanna’s costs comprise the amount of rent that represents the part of the flat that is occupied by Heidi: (12 m2 + 28 m2 x 50%) / 65 m2 x EUR 1,500 x 10 months = EUR 6,000. Hanna’s taxable rental income therefore amounts to EUR 1,000.

Tax payable on rental income

Instructions: