If you are a foreign national owning residential property in Turkey, and you earned rental income in 2025, you may be required to file an annual income tax return in Turkey.

If you choose the Real Expense Method instead of the lump-sum method, you may deduct specific costs such as:

• Property taxes (Emlak Vergisi)

• Insurance premiums

• Maintenance and repair expenses

• Depreciation

• Management and administration expenses

• Certain municipal charges

• Rent you pay for your own residence (if eligible)

However, as of the legislative amendment published in December 2025, interest expenses are no longer deductible for residential rental income (they remain deductible only for commercial/office rentals).

Documentation must be retained for five years, but supporting documents are not submitted with the return unless requested by the tax authorities.

Below is a structured guide tailored specifically for foreign homeowners in Turkey.

1. Who Must Declare Rental Income in Turkey?

Under the Turkish Income Tax regime:

• Non-resident foreign owners are taxed on Turkey-source rental income.

• Resident foreign nationals are taxed on worldwide income, including Turkish rental income.

• If your property is rented as a residential unit (mesken), it falls under real estate income taxation rules.

The annual tax return is generally filed in March of the following year for income earned in 2025.

2. Choosing the Real Expense Method vs. Lump-Sum Method

Foreign homeowners must select one of two taxation methods:

1. Lump-Sum Expense Method (Götürü Gider)

   • Fixed percentage deduction.

   • Simpler but less flexible.

2. Real Expense Method (Gerçek Gider Yöntemi)

   • Allows deduction of actual documented expenses.

   • Often more advantageous for leveraged or recently acquired properties.

This article focuses exclusively on the Real Expense Method and deductible items.

3. Deductible Utility and Common Area Expenses

You may deduct the following only if paid by you as the landlord:

• Electricity for common areas

• Heating expenses

• Water expenses

• Elevator maintenance

If the tenant pays these directly, you cannot deduct them.

If you pay and recharge the tenant, the reimbursed amount must first be included in gross rental income.

4. Administrative and Management Costs

Reasonable administration expenses directly connected to the rental activity are deductible.

Examples include:

• Property management company fees

• Payments for caretakers or security

• Rental collection costs

• Building protection expenses

The expense must be proportionate to the property’s economic importance.

5. Insurance Premiums

You may deduct insurance premiums related to:

• Fire insurance

• Earthquake insurance (DASK)

• Landlord liability insurance

• Other policies protecting the rented property

Only insurance covering the rental property qualifies.

6. Interest Expenses – Important 2025 Change

Until recently, mortgage interest was deductible for both residential and commercial rental income.

However, following the amendment published in the Official Gazette on 4 December 2025:

• Interest expenses are no longer deductible for residential rental income.

• Deduction remains available only for commercial property rentals.

This rule applies to 2025 income onward.

This is particularly relevant for foreign investors who financed Turkish property purchases via loans.

7. 5% Acquisition Value Deduction (Residential Property Only)

If you rent out one residential property, you may deduct:

• 5% of its acquisition cost

• For up to five years from the acquisition date

Important conditions:

• Applies to only one property

• Starts from the acquisition year (not rental start year)

• Cannot create or carry forward a loss

• Cannot be offset against income from other properties

This is frequently overlooked by foreign owners.

8. Taxes and Municipal Charges You Can Deduct

You may deduct:

• Annual Property Tax (Emlak Vergisi)

• Environmental Cleaning Tax (if paid by landlord)

• Municipal participation shares (road, sewerage, water infrastructure)

However:

• Title deed transfer tax paid during purchase is not deductible

• It may instead increase the acquisition cost for depreciation purposes

9. Depreciation (Amortization)

Depreciation may be claimed on:

• The building portion of the property

• Improvements added to the property

• Fixtures and equipment used in rental activity

Depreciation base is:

• Acquisition cost (if known)

• Otherwise, tax valuation base

Land value is not depreciable.

For foreign investors, this is often a key long-term tax planning tool.

10. Repairs vs. Capital Improvements

Deductible (Immediate Expense)

• Ordinary repairs

• Maintenance work

• Plumbing fixes

• Elevator repairs

• Heating system maintenance

Capitalized (Not Immediately Deductible)

• Major renovations

• Structural alterations

• Boiler installation

• Heating system conversion

• Landscape redesign exceeding normal maintenance

These must be added to property cost and depreciated.

Exception:
Certain energy-efficiency improvements (e.g., insulation) may be deductible directly, subject to monetary thresholds.

11. Maintenance and Preservation Expenses

Expenses to prevent deterioration are deductible, such as:

• Boiler servicing

• Water system servicing

• Electrical maintenance

• Elevator safety inspections

These must relate to rental activity.

12. Subleased Properties

If you rent a property and sublease it:

• The rent you pay is deductible

• Other actual rental expenses are also deductible

13. Rent Paid for Your Own Residence

If you:

• Own a property and rent it out,

• But live in another rented property,

You may deduct the rent you pay for your own residence from your rental income — provided:

• The rented-out property is residential

• You are not renting it as a commercial unit

There is no limitation based on the number of rental properties.

14. Damages and Compensation Payments

You may deduct compensation paid under:

• Contractual obligations

• Court decisions

• Legal liabilities related to rental activity

15. Non-Deductible Expenses

Foreign homeowners should note the following are NOT deductible:

• Personal income taxes

• Tax penalties

• Late payment interest

• Administrative fines

• Expenses relating to personally used or vacant property (if deliberately kept empty)

Expenses must relate to rental activity.

16. Proportional Deduction When Exemption Applies

If you benefit from the residential rental income exemption threshold:

You cannot deduct expenses attributable to the exempt portion.

Deductible portion is calculated using the formula:

[
(Total Expenses × Taxable Income After Exemption) ÷ Total Rental Income
]

This technical calculation often results in unexpected tax differences.

17. Documentation Requirements

If you select the Real Expense Method:

• You do NOT attach invoices to the tax return.

• You must retain documents for five years.

• You must present them upon request.

Failure to provide documentation may result in reassessment.

18. Practical Risks for Foreign Owners

Foreign investors frequently face:

• Misclassification of expenses

• Incorrect depreciation calculations

• Ineligible interest deductions

• Improper exemption calculations

• Failure to consider double taxation treaties

Turkey has extensive tax treaties that may prevent double taxation in your home country.

Professional structuring is critical.

Conclusion: Strategic Tax Structuring for 2025 Rental Income

For foreign homeowners in Turkey, the Real Expense Method can significantly reduce taxable income, but only if applied correctly.

The 2025 amendment eliminating mortgage interest deductions for residential rental income makes proper planning more important than ever.

If you own:

• One or multiple residential properties

• Leveraged investments

• Mixed residential and commercial units

• Or if you are unsure about residency status

A structured review before filing is advisable.

Need Professional Assistance?

If you are a foreign property owner in Turkey and want:

• A full rental income compliance review

• 2025 tax return preparation

• Deduction optimization analysis

• Double taxation treaty coordination

• English-language CPA support

You should seek professional advisory tailored to cross-border investors.

Proper compliance today prevents penalties tomorrow.

info@ozmconsultancy.com