SteuerGo FAQs

What is depreciation?

Depreciation (also "deduction for wear and tear" or AfA) allows the purchase or construction costs of a building or construction work to be spread over several years as income-related expenses for tax purposes. This reduces your tax burden, as the annually deductible portion of the costs is subtracted from your taxable income. Depreciation applies to rented or commercially used properties, but not to the value of the land, as this does not depreciate for tax purposes.

Types of Depreciation

1. Straight-Line Depreciation (AfA)

With straight-line depreciation, a fixed percentage of the purchase or construction costs is deducted annually:

• For buildings constructed after 31 December 1924, the depreciation is 2% per year over a period of 50 years.
• For buildings constructed before 1 January 1925, the depreciation is 2.5% per year over 40 years.
• For buildings completed after 31 December 2022, depreciation is 3% over 33 1/3 years.

Example:

• Purchase price excluding land: 200.000 Euro
• Annually deductible amount at 2% AfA: 4.000 Euro
• Tax saving at a tax rate of 35%: 1.400 Euro per year.

2. Declining Balance Depreciation (AfA)

Since 1 October 2023, declining balance depreciation applies to newly constructed rental residential buildings. Conditions: Construction start or purchase contract between 1.10.2023 and 30.9.2029 and acquisition in the year of completion. The regulation also applies to buildings in the EU/EEA.

The depreciation is 5% of the investment costs in the first year. In the following years, five percent of the remaining value. A switch to straight-line AfA (3% annually) is possible.

3. Special Depreciation under § 7b EStG

Special depreciation was introduced to promote the construction of rental housing:

• For building applications between 1 January 2023 and 31 December 2026.
• Special depreciation: 5% of the purchase or construction costs in the first four years, in addition to a straight-line AfA of 2%.
• Upper limit: 4.000 Euro per square metre of living space, construction cost limit: 5.200 Euro per square metre.

The special depreciation is linked to certain efficiency requirements, e.g. the "Sustainable Building Quality Seal".

Special Regulations for Depreciation

• Pro rata depreciation: If a property is purchased or sold during the year, depreciation is only applied for the relevant period.
• Change of depreciation method: With declining balance depreciation, a switch to straight-line AfA can be made at any time. Depreciation is then based on the remaining value.

Tip on Special Depreciation

Compliance with de minimis aid is required for businesses. These regulations do not apply to private landlords.