Lengthy renovation without rental income not recognized as income-related expenses

Oct 30, 2025

Renovation work on rental properties is an essential part of property management. Under certain conditions, expenses for the repair and modernization of rental properties are recognized as income-related expenses for tax purposes. The prerequisite for this is that there is an intention to generate income. The renovation work must therefore be aimed at making the property rentable or improving its condition in order to generate higher rental income or increase the value of the property.

The Düsseldorf Finance Court had to deal with a case involving renovation work that had been ongoing for over 10 years without any concrete, comprehensible plan as to when the renovation would be completed.

In the case in question, a former civil engineer had begun renovating an apartment building he owned after it had been vacant, without following a specific schedule. In his income tax returns, he claimed the renovation costs incurred over several years as income-related expenses, citing his intention to rent out the building at a later date. After 10 years of renovation work without a specific completion date, the tax office refused to allow the deduction of income-related expenses, and the tax court ruled in the lawsuit that the costs would no longer be recognized because, without a specific completion schedule, there was no credible intention to rent the property, especially since the duration of the renovation work far exceeded the usual amount.

In the case of building renovations for rental purposes, a specific implementation plan should therefore be drawn up in order to obtain tax advantages for the costs incurred.