Homeownership

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The inclusion of owner-occupied residential property in the support provided by the old-age provision allowance is referred to as an owner-occupied home pension (also known as “Wohn-Riester”) . This funding option has been significantly expanded in the “Eigenheimrentengesetz” (BR-Drs.438 / 08). The regulations for the owner-occupied home pension are to be found in the XI. Section of the Income Tax Act.

Aim of promotion

The aim of the funding is to create incentives for additional private old-age provision by including owner-occupied apartments in the tax-subsidized pension scheme.

Subject of funding

Be funded

  1. an apartment in your own house (even if the apartment is in your own apartment building) or
  2. own condominium or
  3. a cooperative apartment of a cooperative entered in the cooperative register or
  4. a property-like or lifelong permanent right of residence according to Section 33 of the Condominium Act, provided that the agreements under Section 39 of the Condominium Act have also been agreed,

if this apartment is used by the person entitled to the allowance himself, represents the main residence or the center of the life interests of the person entitled to the allowance and is located in a member state of the European Union or in a state to which the Agreement on the European Economic Area (EEA Agreement) is applicable. Holiday or weekend apartments are not subsidized.

The legal regulation results from § 92a Abs. 1 Income Tax Act (EStG)

Funding approaches

The home ownership model consists of two funding approaches:

  1. If you have a Riester contract , you can use all of your saved and tax-subsidized capital directly to buy / build your own home or to repay a loan taken out for this purpose. There is no obligation to repay the withdrawn amount.
  2. On the other hand, expenses for the repayment of a loan for the purchase or construction of an owner-occupied apartment such as contributions to a Riester savings contract are subsidized. There are three possible forms of beneficiary loan contracts: annuity loans , a combination of a savings contract with a loan option (typically a Bausparvertrag ) or a pre loan (typically a home savings combination Treaty).

The legal regulation results from § 1 para. 1a Age Certification Act (AltZertG)

Downstream taxation

The downstream taxation is ensured by a "housing subsidy account" on which the withdrawal amount, the subsidized repayments and the allowances granted for this are booked. To compensate for the early use of the retirement capital and to equate it with other Riester products, the amount placed in the housing subsidy account is increased by 2% at the end of each year during the savings phase.

At the beginning of the pension, the status of the housing subsidy account is divided by the number of years up to the 85th year of the beneficiary's age. The resulting annual amount is added to the taxable income of the beneficiary. Whether the beneficiary actually has to pay taxes depends on the other income and personal circumstances of the beneficiary.

Alternatively, the beneficiary can also submit an application for one-time taxation. Then, in the year in which the pension begins, 70% of the current status of the housing subsidy account will be added to the taxable income of the beneficiary. If one-time taxation is chosen, a tax retention obligation begins from the beginning of the pension (§ 22 No. 5 S. 3-4 Income Tax Act)

Since January 1, 2014, it has been possible to opt for one-off taxation retrospectively after a decision in favor of the proportional deduction of the tax burden. In this case, too, the account balance of the housing subsidy account on which the taxation is based is discounted by 30%. The tax holding period also applies here.

Reimbursement of funding / taxation / application for tax deferral due to Exceptions

The Riester subsidy no longer has to be paid back if the apartment was sold or rented from 2014. However, the subsidized contributions, allowances and the income attributable to them are to be taxed as other income on the tax return for the year in which self-use is ceased.

There are exceptions to the immediate tax liability if

  • the owner-occupied apartment cannot be used due to a job-related absence (if the apartment is rented out during this time, the rental contract must be limited in time from the outset) and the taxpayer intends to resume owner-occupation after the job-related absence, and at the latest is resumed when the taxpayer reaches the age of 67. The job-related absence must be checked and approved by the Central Allowance Office for Pension Assets (ZfA) on the basis of an application made by the person entitled to allowance.
  • the funding amount was reinvested in owner-occupied residential property in the period from two years before the sale or rental to five years after the sale or rental (since January 1, 2014).
  • the beneficiary declares that they will move back into their owner-occupied home within five years of moving out (since January 1, 2018)
  • the person entitled to the allowance declares that they have to move out temporarily due to illness / care and that they intend to move back into the home that has not been used by third parties (other than the spouse) in the meantime
  • the person entitled to the allowance declares that he / she was expelled from the marital home due to a judicial decision in accordance with Section 1361b of the German Civil Code (BGB) until the assets were clarified in the divorce proceedings

The legal regulation results from § 92a Abs. 3 Income Tax Act (EStG)

Entry-level bonus

Those entitled to allowances who have not yet reached the age of 25 at the beginning of the calendar year will receive a one-off basic allowance increased by EUR 200 (entry-level bonus). The bonus is granted ex officio for the first contribution year from 2008 for which an application is made for a pension supplement. If the full minimum personal contribution is not paid, the career starter bonus will be reduced proportionally.

Extension of funding eligibility

With the Eigenheimrentengesetz (Eigenheimrentengesetz), the group of those directly entitled to support was expanded to include people

  • receive a pension for full disability or disability from the statutory pension insurance or the old-age insurance for farmers or are not yet 67 years old and receive a pension for disability, and
  • belonged to the group of people eligible for funding prior to receiving the benefit.

Criticism: suitability of the apartment as a pension supplement

To what extent an apartment should be eligible as part of the Riester pension was controversial from the start. It is true that real estate owners do not have to pay rent in old age. Nevertheless, there is a need to have adequate funds available in old age. An apartment does not contribute to this. For this reason, when the Riester pension was introduced, it was only planned to withdraw funds to finance an apartment if the withdrawn funds were paid in again by the start of the pension.

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