> For the complete documentation index, see [llms.txt](https://help.immodio.app/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.immodio.app/en/anleitung/einnahmen-und-ausgaben/buchhaltung-erweiterung/10012300-aufnahme-eines-bankdarlehens-darlehens-kredits.md). # Taking out a bank loan or credit Help on the Immodio entry item Taking out a bank loan, loan or credit.
Use this category where you **take out a bank loan or credit** and thereby create a new liability to a credit institution. A typical case of application for landlords is financing the purchase, construction or refurbishment of a let property. The payout of the loan is **not taxable rental income**. You do receive money from the bank, but at the same time an obligation to repay in the same amount arises. ### The most important distinctions **The loan is paid out →** "**Taking out a bank loan, loan or credit**" **The loan is repaid →** "**Repayment of a bank loan, loan or credit**" **The bank charges interest → "Debt interest, interest for a bank loan, loan or credit**" **Costs arise for obtaining the financing → "Costs of obtaining finance (for example valuation, notary and land registry fees)**" {% hint style="warning" %} These transactions have to be recorded separately so that the loan balance, the financing costs and the income-related expenditure relevant for tax remain properly distinguished. {% endhint %} ### What can be entered here? Enter here in particular the initial payout of a bank loan, for example for: * buying a let property, * building a rental property, * a larger refurbishment or modernisation, * financing let units, * refinancing or follow-up financing of an existing property loan, * other credit directly connected with your letting activity. ### Example: buying a let apartment You buy a freehold apartment for €300,000. The financing consists of: * €100,000 of equity * €200,000 of bank loan The bank pays out the loan of €200,000. The **€200,000 of borrowing** is recorded in this category. This documents that a liability of €200,000 to the bank has arisen. The €200,000 is, however, **not rental income and not taxable income from letting and leasing**. ### Always separate borrowing, repayment and interest With a loan, three different transactions have to be kept separate: #### 1. Taking out the loan The initial payout of the credit is recorded under: **"Taking out a bank loan, loan or credit"**. #### 2. Repaying the loan When you repay the loan, use the category: **"Repayment of a bank loan, loan or credit"** The repayment only reduces your liability to the bank. It is in principle **not an item of income-related expenditure for income from letting and leasing**. #### 3. Debt interest The interest charged by the bank is entered separately under: **"Debt interest, interest for a bank loan, loan or credit"**. With letting, debt interest can be taken into account for tax as income-related expenditure where the loan was actually used to generate income from letting and leasing. Both the purpose of the loan and the actual use of the loan funds are decisive. ### An example of a monthly credit instalment You pay €1,500 per month to your bank. According to the repayment schedule the instalment consists of: * €850 of interest * €650 of repayment The amounts are then recorded separately: **€850 → debt interest** **€650 → repayment of the loan** The original borrowing is not entered again as a result. ### For the deduction of the interest, the use of the loan is decisive The mere fact that a landlord has taken out credit is not sufficient to deduct the interest on it for tax. What is decisive is **what the borrowed money was actually used for**. The Federal Fiscal Court looks here at the economic connection between the loan and the letting activity. Debt interest can be taken into account as income-related expenditure where the loan was actually used to generate letting income. #### Typically related to letting A connection with the letting can exist, for example, where the loan is used for: * buying a let apartment, * buying a let apartment building, * the production costs of a building let later, * renovation and refurbishment measures on a rental property, * repaying an existing loan originally taken out for a rental property. With refinancing too, the connection with the letting can in principle be preserved where the new loan actually replaces the previous loan relating to the letting. ### Mixed-use properties Particular care is needed where a property is partly let and partly used by the owner. Example: You buy a two-family house. * 60% of the building is let. * You use 40% yourself. Where a loan is used for both parts of the building, the debt interest cannot automatically be assigned in full to the income from letting. For the assignment for tax, what matters is which part of the loan was actually used to finance the part of the building that is let. The tax authorities and the Federal Fiscal Court require a comprehensible assignment of the financing for this. With mixed-use properties in particular, the payment routes and the use of the loan should therefore be documented particularly carefully. ### Private use of the loan Where a loan is used wholly or partly privately, the debt interest attributable to it is not income-related expenditure simply because the borrower is also a landlord. Example: You take out credit of €100,000. Of this you use: * €70,000 for refurbishing a let apartment, * €30,000 for private purposes. There is then an economic connection with your letting income only in respect of the share of the loan relating to the letting. The Federal Fiscal Court expressly looks at the **actual use of the loan funds**. ### Record the costs of obtaining finance separately Costs arising for obtaining a loan do **not** belong in this category. The costs of obtaining finance can include, for example: * certain costs of creating a land charge, * valuation costs in connection with the financing, * certain notary and land registry costs of the financing, * credit commissions, * administrative charges of the credit institution. These costs may not be mixed with the loan amount itself. Use the category "**Costs of obtaining finance (for example valuation, notary and land registry fees)**" for them ### Do not confuse incidental purchase costs with financing costs Notary and land registry costs are not automatically costs of obtaining finance. A distinction has to be made as to **why the costs arose**. Costs directly connected with acquiring the land or building can be incidental acquisition costs. Costs arising exclusively for the financing or for creating credit security, on the other hand, can be costs of obtaining finance. This distinction is important for the treatment for tax. ### Assignment in Immodio For the assignment select **"Owner"** and then the owner who is the borrower or economically responsible for the loan. Where there are several owners or the loan was taken out jointly, the assignment should match the actual ownership and financing arrangements. You can find further information **here**. ### Not operating costs for the tenant Taking out a loan is **not a recoverable operating cost item**. Nor are: * repayments, * financing costs, * the landlord's debt interest allocated to the tenants through the operating cost statement. Financing the property is in principle within the owner's economic sphere and not part of the building's running operating costs. ### No 19% VAT on the borrowing 19% VAT may not be entered across the board on the loan amount paid out. Taking out credit is not an ordinary supply of goods or services by the landlord. Granting credit is also one of the financial transactions exempt from VAT under Section 4 no. 8 letter a of the German VAT Act. **No blanket default VAT rate of 19%** should therefore be used for this Immodio category. ### What should you keep? For every property loan the following documents in particular should be kept: * the loan agreement, * the bank's proof of payout, * the repayment schedule, * bank statements, * annual interest certificates, * evidence of special repayments, * documents on follow-up financing or refinancing, * documents on the creation of the land charge, * invoices for financing costs, * evidence of the actual use of the loan. For loans for mixed-use properties it should also be documented comprehensibly which share of the loan is attributable to the let part and which to the privately used part. ## Legally important Taking out a loan is not taxable letting income. Debt interest and the costs of obtaining finance in particular become relevant for tax under [Section 9 (1) EStG](https://www.gesetze-im-internet.de/estg/__9.html).