German Tax - Buying a piece of land and constructing a house, living in it.

[MunichResident]

Dear ToyTown community,

I bought a piece of land in 2023. I did not declare anything w.r.t that in my 2023 in my Tax declaration. Thus, Tax department in tax response letter - "Bescheid für 2023" - asked me the following:

Nach den vorliegenden Unterlagen haben Sie in 2023 ein unbebautes Grundstück erwroben .Bitte teilen Sie mir mit der Einkommensteuer 2024 mit wie das Grundstück in Zukunft genutzt wird.

Translated: "According to the documents available, you acquired an undeveloped plot of land in 2023. Please let me know how the property will be used in the future with the 2024 income tax"

Current status:
In March 2024, I have signed a contract with a builder to build a KfW 40: Effizienzhaus with KfW 300 funding. At the end of CY 2024, I have paid 5% of the house price + Earth works (Erdarbeiten) and Foundational Concrete Plate (Bodenplatte) work has been completed. I expect the house to be completed in CY 2025.

Now, I'm seeking help from you, for the following (Thanks in advance for your guidance ):
Questions

1. In my 2024 tax declaration, to respond to the Tax officer's query - should I just write a: a) comment about the current status or b) declare "Anlage V - Sonstige" and declare no income from Undeveloped Land Property "unbebauten Grundstücken"
2. During my research, I also noticed 10f EStG can be claimed by "Anlage FW (Förderung des Wohneigentums)", which describes about Tax relief for buildings owned / used for private purposes. Can someone explain how this works, if I could get tax relief for construction invoices - any other links to further information with an example would be helpful?

[Robinson100]

I don´t really have the answer for you, but have you thought of calling the tax office and asking them?
In the past I have called them several times with a query, and have always found them to be really helpful!

[PandaMunich]

In my 2024 tax declaration, to respond to the Tax officer's query - should I just write a: a) comment about the current status or b) declare "Anlage V - Sonstige" and declare no income from Undeveloped Land Property "unbebauten Grundstücken"

No, you are supposed to write them a letter (or an ELSTER message or an e-mail, just google the name of your Finanzamt together with the word "e-mail") immediately and explain that you are building a family home for yourself on this land.
You will not fill in anything into your tax return because of this land.

During my research, I also noticed 10f EStG can be claimed by "Anlage FW (Förderung des Wohneigentums)", which describes about Tax relief for buildings owned / used for private purposes. Can someone explain how this works, if I could get tax relief for construction invoices - any other links to further information with an example would be helpful?

Well, if you invent a time machine and travel back to 1995 and build the house then, you could claim in Anlage FW because of § 10e EStG: https://www.haufe.de/steuern/haufe-steu ... 71257.html

The other one, § 10f EStG, would only apply if you:

• were renovating (= not building a new building!) in a Sanierungsgebiet. That is what the pointer to § 11a Absatz 1 EStG is about.
  At the moment, the Sanierungsgebiete in Munich are: https://stadt.muenchen.de/infos/staedte ... ahmen.html
  - Aubing-Neuaubing-Westkreuz
  - Moosach
  - Neuperlach (2 areas)
  - Ortskern Ramersdorf
  - Tegernseer Landstraße
  - Trudering
  However, a new build like yours is excluded by § 7h (1a) Satz 1 EStG: https://dejure.org/gesetze/EStG/7h.html
  - "1 Paragraph 1 shall not apply if measures lead to the construction of a new building."
  And even if you were just renovating, you could still renovate "too much" and it would suddenly "count" as a new build: https://www.haufe.de/finance/haufe-fina ... 84661.html
• you were renovating a listed monument (Denkmal) or a building that is part of an ensemble of listed monument, i.e. a very old building. That is what the pointer to § 11b Satz 1 oder 2 EStG is about

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Off the top of my head, the only thing you would still be eligible for would be a low-interest loan through "KfW 300: Wohneigentum für Familien", which you say you already get.

For others, the conditions for this program are:

1. you have at least one child up to age 18 living with you
2. the taxable income of your household (= you and your spouse) has to be up to 90,000€ per year, plus 10,000€ for every child. Your taxable income is your gross salary (or your profit) minus your health&nursing insurance contributions and minus your public pension contributions.
3. you are building an "Effizienzhaus 40"

Details here:
https://www.kfw.de/inlandsfoerderung/Pr ... ien-(300)/
https://www.finanztip.de/kfw-foerderung ... -familien/

[MunichResident]

Thank you very much @PandaMunich for making your answer as always, informative for others who follow. I will make use of Elster's email or notification functionality to respond to their query immediately.

P.S: I wish I had a time machine not to claim Anlage FW - but for other things - a nice one