A vacant apartment also generates savings – how can the costs of finding a tenant be deducted?

An empty apartment does not have to mean only losses. If an occupant is actively being sought – advertisements are published, interested parties are contacted, or an agent is used – an intention to let can be demonstrated and part of the expenses can be claimed as rental costs. Evidence matters: advertisements, invoices, correspondence and notes from viewings of the property. Under German rules, a property tax relief for vacant properties also applies when income has fallen below 50% of the possible market rent and the absence of a tenant is not attributable to any fault of the owner. As a rule, the application is submitted by 31 March of the following year. 

When can an empty apartment generate tax-deductible expenses?

An empty apartment can generate tax-deductible expenses when it can be shown that the property is intended for long-term letting and that a tenant is being actively sought. The issue is therefore not that the apartment stands empty for a few weeks or months. The issue is what is being done during that time.

If the property has already been let before and, after the tenant moves out, a new tenant is being sought, the tax office will usually take a more practical view. There was a tenancy, there was income, and there is a break. Such a break may be normal: walls have to be refreshed, equipment repaired, photos taken, an advertisement placed, and the price adjusted. Problems begin when there is no evidence that the search for a tenant is actually taking place.

The situation is different when the apartment has never been let before. In that case, the intention to let vacant property must be demonstrated even more clearly. Simple evidence works well: the date the advertisement was published, the listing description, messages from applicants, confirmation of viewings, invoices for preparing the property. If tax support is being used, these materials should be provided immediately, so that the adviser does not have to reconstruct the history several months later.

Costs may include, among other things:

• administrative charges for the property,
• advertising costs,
• brokerage commission,
• expenses for minor repairs,
• costs of preparing the apartment for viewings by tenants,
• interest on a loan related to the property, if the conditions for deduction are met.

The easiest way to remember this principle is: the expense must be connected with the letting of the property – also during a temporary vacancy – and not with private use of the apartment. If paint is purchased to freshen up the property before the advertisement is published, this is easier to justify. If the property remains let-free for years and there are no advertisements or contacts with tenants, the position becomes difficult to defend before the tax office.

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Money should not be spent merely because “it can be deducted from tax anyway”. Deducting an expense does not mean a refund of the entire amount spent – the expenditure only reduces taxable income. So if a paid listing highlight costs €200, the first question is whether it will actually increase the chances of finding a tenant. For tax purposes, the cost may be beneficial, but economically it still comes out of the pocket.

How can the intention to let be proven to the tax office?

The intended letting of the property is proven primarily through regular, specific and verifiable actions. A declaration of “intended to let” is too weak. The tax office needs traces showing that the apartment was actually offered on the market.

Documents should be prepared from the first day of vacancy. Do not wait until explanations are requested. Screenshots of advertisements should be saved, confirmations of paid publications retained, and correspondence with interested tenants recorded. If several people call, make a short note: date, name, subject of the call, reason for no decision. This does not need to be an extensive report. What matters is that, later on, it can be reconstructed that a tenant was actively being sought.

If a real estate agency is used, keep the contract and messages from the agent. This is one of the strongest forms of evidence, as it shows that not only was an advertisement placed, but real action was commissioned from someone else. In a tax advisory service offering, such documents are very useful when preparing the return, because they make it possible to link the expenses to a specific purpose: letting, rather than private ownership of the apartment.

A well-prepared set of documents may include:

• copies of advertisements with publication dates,
• a history of advertisement renewals,
• invoices for advertisements and promotion of the listing,
• the contract with the agent,
• correspondence with applicants,
• confirmations of apartment viewings,
• photos of the property after renovation or freshening up,
• documentation of rent adjustments, if the market is being responded to.

Which expenses can be claimed while searching for a tenant?

While searching for a tenant, expenses that are reasonably connected with preparing the apartment for rent and keeping it available for a tenant can be claimed. Not every invoice automatically becomes an expense – the link to income, the purpose of the expenditure and the evidence matter. Such costs may include, among others, administrative charges, operating costs, minimal utility costs or insurance, if the property is genuinely waiting for a tenant.

A separate group consists of expenses that help find a tenant: advertisements, listing highlights, professional photos, a description prepared for the portal, or a broker’s commission. Repairs and freshening up the property can also be claimed, for example painting walls, replacing a damaged tap, repairing a door or a non-functioning socket. Invoices, “before and after” photos and a short note explaining why the work was necessary should be retained.

For tax return purposes, it is not enough to enter a single lump sum as “renovation.” It is better to indicate what was done, when, for how much, for what purpose, and whether the apartment was being offered to tenants at the time. Caution is needed with larger renovations – if the work drags on for years and there are no advertisements, no schedule and no visible progress, the tax office may conclude that rental was not a genuine objective.

Relief in Grundsteuer for vacancy – when can part of the tax be recovered? 

Property tax on vacant properties may be partially reduced or refunded if rental income is significantly lower for reasons beyond control. The condition is income below 50% of the possible market rent or and submission of the application by 31 March of the following year. This is an important date, because once it has passed, recovery of part of the tax may no longer be possible.

In practice, this concerns a situation in which the apartment could generate a certain rent, but due to vacancy or payment problems the actual income is much lower. If the tenant does not pay despite reminders, the situation is different from one in which rental is blocked, an unrealistic price is demanded, or inquiries are ignored. The tax office looks at the owner’s fault. The lack of income must not result from inactivity.

This is not an automatic preference for every empty unit – it must be shown that the tenant search was intensive and reasonable, and that the lack of income did not result from inactivity. Prepare documents confirming that the unit was intended for rental, that income fell below a material threshold, and that this was not caused by a failure to act. 

In this context, the term tax declaration for vacant properties also appears, but it does not always mean a single simple form – in practice, it may refer to an application, explanations and documents submitted to the competent municipality, and in city-states to the tax office. The Grundsteuer relief (Erlass der Grundsteuer pursuant to §33 GrStG) requires evidence, so it is best to keep advertisements, responses from applicants, confirmations of property viewings, correspondence with the agent and justification of the rental price. 

How to prepare documents for the taxation of a vacant apartment?

Prepare the documents for the taxation of a vacant apartment so that they show a simple story: when the unit was empty, why there was no tenant, what costs were incurred and what was done to find a tenant. Start with a short timeline – list the months of vacancy and add specific actions next to them, such as renovation, publication of an advertisement, apartment viewings, contact with an agent, a price change or conversations with applicants. It does not have to be a lengthy document. A table or a text file is sufficient, provided that the dates match the invoices, advertisements and correspondence.

Next sort the expenses by category: maintenance of the property, repairs, marketing, agent and financing. For larger costs, add a brief explanation, e.g. that painting the room was necessary before the new listing was published. In the case of vacancy, confirmations of payments, repair invoices, the agency agreement, screenshots of advertisements with dates, messages from interested persons, notes from property viewings, a comparison of prices for similar units and documents for the application for tax relief or refund are particularly useful. If the real estate tax on vacant property is of interest, the deadline should be remembered — the application must be submitted by 31 March of the following year.

A vacant apartment can still work to tax advantage if the intention to rent the unit, active tenant search and the link between the costs incurred and the future rental can be proven. Check the documents, organise the invoices and advertisements, and obtain professional support in order to tax the vacancy and any possible property tax relief safely. 

FAQ 

Can the costs of finding a tenant be deducted when the apartment is empty?

Yes. Costs can also be deducted when the apartment temporarily does not generate rent, provided that the owner still genuinely intends to rent it out. The key is specific actions such as publishing advertisements, responding to interested parties or working with an agent.

Which costs related to finding a tenant can be deducted?

Eligible costs may include, among others, paid advertisements, promotion of the listing, agent services, preparation of photos and other expenses directly related to obtaining a tenant. The basic principle is the link between the expense and the generation, securing or preservation of rental income.

Can the agent’s commission for finding a tenant be deducted from tax?

Yes. If the agent was engaged to find a tenant, the fee may constitute a cost of generating rental income. However, this commission must be distinguished from the brokerage fee paid when purchasing the property, which may be part of the acquisition costs.

Can costs incurred before the first rental of an apartment be deducted?

Yes, this is possible as so-called vorweggenommene Werbungskosten. It must, however, be shown that the decision to rent out was already concrete and final. This is supported by advertisements, an agreement with an agent, correspondence with applicants and other actions taken before the first tenant was found.

How long can costs be deducted during vacancy?

There is no single statutory number of months after which the right to deduct automatically expires. What matters is whether the owner continues to make serious and regular efforts to rent out the apartment. However, a prolonged lack of action may cause the Finanzamt to challenge further deduction of costs.

What should be done if no tenant can be found for a long time?

It is advisable not only to renew the same advertisement, but also to react to market conditions: check the rent level, change the way the listing is promoted or use other channels for finding tenants. Offering an apartment for many months without any reaction to the lack of interest may weaken the argument that the owner is genuinely seeking to rent out the unit.

Can the apartment be used privately while a tenant is being sought?

Private use of the unit may make it more difficult to allocate the costs fully to the rental. If the apartment is in fact intended to generate income, it should remain available to potential tenants. In the case of partial private use, an appropriate allocation of costs may be necessary.

Can loan interest also be deducted during vacancy?

Yes, provided that the loan remains connected with the rented property and the owner has not abandoned the intention to rent it out. German law classifies interest that is economically connected with the relevant source of income as Werbungskosten.

What part of Grundsteuer can be recovered because of vacancy?

For a developed property, remission of 25% of the Grundsteuer is possible if the normal income from the property fell by more than 50% for reasons beyond the owner’s control. If the decline was 100%, the remission may amount to 50% of the tax. The application must be submitted by 31 March of the year following the year to which the relief relates.

Where are the costs incurred while searching for a tenant shown?

Expenses related to a rented property are reported in the tax return for rental income, as a rule in Anlage V. It is advisable to allocate each expense to the specific property and to retain documentation confirming both its amount and its connection with the rental.