Tax depreciation rates in Germany

Tax depreciation rates in Germany

The German tax authorities allow property owners to activate building depreciation as a cost to reduce the taxable income. In other words property owners can claim the acquisition and production costs of their property for tax purposes. The AfA is legally defined in the Income Tax Act (Section 7 EstG).

The Afa is only for property owners that he/she rents or leases the property, i.e. uses it to make a profit.

There is no depreciation for owner-occupied property, because the state regards living in an owner-occupied home as a private matter.

Acquisition costs:

Purchase price of the property

Notary costs for the notarization

Brokerage commission

Real estate transfer tax

Fees of the land registry:

Expert costs

Travel and telephone costs, but only in connection with the property purchased

Production costs:

Costs for building permit and acceptance

Architect's fee

Craftsman costs

Building material

Connections to the electricity, gas, water and sewage networks installed for the first time

Fencing, including hedges or trees

Travel costs to the construction site

If you buy a investment property and want to carry out renovation or refurbishment work immediately, you must note that renovation depreciation over a short period in the first three years after acquisition is only possible if the costs do not exceed 15 percent of the acquisition costs (excluding VAT)

Summary:

A depreciation rate of two percent annually applies.

For houses built after 1925, two percent of the acquisition cost can be deducted from tax for 50 years.

For houses built before 1925, a rate of 2.5 percent applies over a 40-year depreciation period.

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