Income from renting: Early repayment penalty as income-related expenses

Oct 30, 2025

In its ruling of October 30, 2024, the Lower Saxony Finance Court (FG) decided that the early repayment penalty payable to a bank when a loan is redeemed and the processing costs can be taken into account as income-related expenses for income from renting and leasing if the property continues to be used to generate rental income.

This situation contrasts with the otherwise usual cases where early repayment penalties and
processing costs are incurred when a property is sold and are therefore not economically related to the generation of income, but to the sale of a property. In this respect, the FG's decision is also not in conflict with a decision of the Federal Fiscal Court (BFH) concerning the sale of a property.

Source: Lower Saxony FG, judgment of October 30, 2024 - Ref. 3 K 145/23