We are buying my parents-in-law house and renovating the property (new heating, new flooring, new bathrooms, slight floor plan change on ground and upper floors).
It has been decided that we will buy the property in 2023 or 2024 if preferable (the money my inlaws receive may be used to purchase their next accommodation or help my wifes siblings). My inlaws will be moving out the latest spring 2024. Upon them moving out we will start the main part of renovation and hope to move in before the end of summer 2024.
There is quite a lot of flexibility from both parties involved to achieve the best result financially for everyone. With this in mind we were thinking that we would have the "Kauf Datum (purchase date)" and "Schaden Datum (move in date?/ responsibility for damages date) " on the purchase contract (“Kauf Vertrag”) both in 2023. The reason being we could then have the "Rental Income / Eigenmietwert" in our name for 2023, but hope to have some renovation bills in our name to offset this increase in tax and also offset against our taxable income for 2023. We would attempt to spread the renovation costs over 2023 and 2024 for the associated tax benefits. Being pensioners, my in-laws have lower income than us, so if we can't offset the renovation against the taxes then purchasing in 2024 would probably be better. Everyone would just like to get the contract signed though in 2023 if possible as my inlaws may need the cash to help my wife's siblings too.
One difficulty I see is with the in-laws still living in the property at the end of 2023 with respect to the taxation or mortgage. Can this be resolved by having a simple rental agreement? Does this bring complications with obtaining a mortgage or with tax office due to us not yet living there?
Has someone gone through this - does anyone have any recommendations?
Thanks for the response and fair point. The house is almost 40 years old so the heating needs replacement. The current bathrooms are original too. Of course we won't be able to claim the full renovation costs against the tax, but certainly a portion will be possible.
as each canton is a bit different you will have to check with your local tax and notary authorities.
For ZH/AG there are the following date options that I am aware of
1. Beurkundung (=purchase contract is signed, the payment promise from the bank is handed over, no money leaves the account though except if you agreed a down payment. After this one basically cannot get out of the contract anymore, however the sellers can still live in the place and have full responsibility for damages)
2. Eigentumsübertragung (=after this signature you officially own the place and it is recorded in the Grundbuch, it is at your discretion to have renters/do renovations etc, the money leaves your account for the seller's)
3. Antrittstag (=not really an official date but can be in the contract, this is the date when you take over all responsibilities should you not have done so already at 2.)
These 3 dates can all be the same, can all be different or 1+2 or 2+3 possible.
dont forget your inlaws will need to pay tax on their profit, which can be quite substantial depending on canton
If it is a sale, then think about the price. If it is not fair, the wife’s other siblings may dispute it.
Also, if it is too low and you are forced to sell early, the capital gains will appear higher and this is taxed (usually 100% in the first 5 years).
If the property transfer is, in part, an early instalment of inheritance (Erbvorbezug) ensure it is handled optimally to avoid unnecessary tax. Effectively, this means your wife has to be seen as the recipient.
If all other things are equal, it would be best to do the transfer as soon as possible. The earlier you buy, the sooner the property capital gains tax (Liegenshaftsgewinsteuer) clock starts ticking any investments you make in the property may be tax deducable. I guess the main issue in determining the date is your in-laws finding other accommodation.
Oh yes how we as an extended family want to deal with the Grundstückgewinnsteuer / profit on selling could be a whole new thread. :
It will be a large amount and there was/is some consideration to trying to "shelve/push" the tax payment on to us for a later date when we sell and make sure all parties were compensated appropriately. There is some logic in this but obviously some issues can arise. The likely tax consequences (tax rules can always change) are a bit more clear to us though on this point and how best to deal with them. Unlike the issues & tax issues with the move in and purchase date which we/I am a lot more unaware of.
The effective price of the property has been agreed upon by all parties (including siblings). It just a case of amending the contract/price whichever way to make sure it reflects that along with the appropriate tax considerations.
The original questions arose from a draft contract from a notary here in Kanton Luzern.
Thanks for your comments I will need to research a little using the terms you have used. Initially I guess in Luzern it is something like this (where by number 3 didn't seem to exist on the contract I have seen):