Why is property depreciation important?
Property depreciation is an essential part of tax planning for property owners. It makes it possible to deduct the acquisition or production costs of a property from tax over a fixed period of time. For investors and landlords, depreciation is an important factor in reducing the tax burden and benefiting from their property investment in the long term.
How does property depreciation work?
Amortisation methods and useful lives
There are various depreciation methods that can be applied to property. The most common method in Germany is straight-line depreciation, in which the acquisition costs are distributed evenly over the useful life.
- Straight-line amortisation: In this case, 2 % of the acquisition costs are amortised annually over 50 years if the property was built after 1924. For properties built before 1925, the annual amortisation is 2.5 % over 40 years.
- Degressive amortisation: This method, in which higher depreciation amounts are recognised in the first few years, is currently not permitted for residential buildings. However, it was permitted in the past in special cases.
Distinction between building and land portion
When calculating the depreciation, the portion for the land must be deducted, as this is not deductible. Only the value of the building can be depreciated for tax purposes.
Special features of amortisation
Listed properties
Special depreciation rules apply to listed properties. Here, owners can claim higher depreciation in order to deduct the refurbishment costs over 12 years (8 years per 9 %, 4 years per 7 %).
Acquisition-related production costs
Expenses that are incurred in the first three years after purchase and amount to more than 15 % of the acquisition costs are deemed to be acquisition-related production costs and must also be spread over the depreciation period of the building.
Tips for tax optimisation
- Check the possibility of claiming refurbishment costs for listed properties.
- Pay attention to the correct allocation of maintenance costs in order to avoid the 15 % limit for acquisition-related production costs.
- Take advantage of the tax benefits through special depreciation allowances if you are planning an energy-efficient refurbishment.
Support from experts: Utilise your advantages
The tax treatment of property can be complex. The tax experts in the network of my-home.de help you to utilise the optimum tax advantages and develop an individual strategy for your property.
Get comprehensive advice
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Tax advantages through property depreciation
The correct utilisation of depreciation options for properties can offer considerable tax advantages. Seek professional advice to fully utilise the potential of your property.
Frequently asked questions about property depreciation
In the case of listed properties, renovation costs can be amortised over 12 years (8 years per 9 %, 4 years per 7 %).
Straight-line depreciation distributes the costs evenly over the useful life, while declining-balance depreciation provides for higher depreciation in the first few years.
No, depreciation is only possible for rented or commercially used properties.
Renovation and modernisation costs that exceed 15 % of the acquisition costs in the first three years after purchase.
No, only the building costs can be depreciated, not the land portion.
Disclaimer
The information, recommendations and legal explanations contained in this guide are intended solely as non-binding advice. We assume no liability for the timeliness, accuracy or completeness of the information. This is not legal advice in the legal sense, and the contents cannot replace individual advice from a qualified lawyer or tax consultant.For legal issues arising in connection with property sales, the drafting of contracts or tax aspects, it is essential to seek professional legal advice. Our advice only provides an initial orientation and cannot represent a customised solution due to the complexity of the legal situation.
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