Turning Rental Losses Into Monthly Cash

In year one a leveraged rental flat usually produces a Werbungskostenüberschuss (excess of expenses over rent): interest, AfA, Grundschuld notary fees, letting costs, appraisal. That loss offsets all your other income, salary included, in the same year and without limit (vertikaler Verlustausgleich). For long-term residential letting the tax office normally presumes Einkünfteerzielungsabsicht (profit intention), so ordinary early losses are accepted without a forecast.

Why joint assessment helps

Under Zusammenveranlagung you are treated as one taxpayer: the loss reduces the couple's combined taxable income and the Splittingtarif doubles the bracket thresholds (42% starts at €139,758 of joint taxable income in 2026; Grundfreibetrag €24,696). A €4,200 loss at 42% is about €1,764 of income tax, plus 9% NRW church tax and Soli where the Freigrenze (€40,700 of joint income tax in 2026) is passed - realistically close to €1,950.

Do not wait 15 months for it

The default is a refund with the assessment, up to a year and a half after the money left your account. Instead file a Lohnsteuer-Ermäßigungsantrag under § 39a EStG. The expected rental loss is entered as a Freibetrag under § 39a Abs. 1 Satz 1 Nr. 5 Buchst. b, written to your ELStAM record, and your employer withholds less Lohnsteuer every month.

Practical points:

• The €600 Antragsgrenze in § 39a Abs. 2 applies only to nos. 1-3 and 8. Rental losses count from the first euro.
• A Freibetrag can be granted for two calendar years.
• Applications for the following year open in autumn; the deadline for the current year is 30 November. A January application is credited from 1 January.
• Entering a Freibetrag makes a tax return mandatory (§ 46 Abs. 2 Nr. 4 EStG). You were filing anyway.
• Be conservative. Over-claiming produces a back-payment, not a penalty, but it stings.

Not tax advice - have a Steuerberater size the Freibetrag before you file.