If you own a rental property in Germany and are depreciating it over 50 years, you may be paying far more tax than you need to. A shorter depreciation period can double or even quadruple your annual tax deduction.
When you rent out a property in Germany, you can deduct the building’s wear and tear as an expense each year. This is called Absetzung für Abnutzung (AfA), or depreciation.
The German Income Tax Act (EStG) sets out fixed standard depreciation rates depending on when the building was completed.
| Completion date | Standard AfA rate | Implied useful life |
|---|---|---|
| After 31 December 2022 | 3% per year | 33 years |
| 1 January 1925 to 31 December 2022 | 2% per year | 50 years |
| Before 1 January 1925 | 2.5% per year | 40 years |
These are the defaults the tax office uses. They do not account for the actual condition, age, or construction quality of your specific building.
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For example, an older building in poor condition may have a remaining useful life of 20 or 25 years, not 50. Thus, depreciating over 20 or 25 years makes more sense in this situation. This is why § 7 Abs. 4 Satz 2 EStG allows you to use a shorter depreciation period if you can prove it.
How can a shorter depreciation period save you taxes?
Let’s take a property that costs €700,000. You and your tax advisor agree that €500,000 of that amount is attributable to the building, which is depreciable.
Under the standard rule, you depreciate €10,000 per year (2% of €500,000) over 50 years.
With a real estate expert report supporting a 25-year useful life, the depreciation amount doubles to €20,000 per year. At a marginal tax rate of 42%, the extra €10,000 deduction saves you €4,200 per year.
Over the 25-year period, that is a total tax saving of €105,000.
Periods shorter than 25 years are also possible. An expert might determine a remaining useful life of just 16 or even 12 years for heavily depreciated buildings, pushing the effective depreciation rate to 6% or 8% per year.
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Court rulings have made getting a shorter depreciation period easier than ever
Earlier, the tax office demanded expensive structural condition reports (Bausubstanzgutachten) before accepting a shorter depreciation period. These were time-consuming, costly, and not always conclusive.
In July 2021, Germany’s highest tax court (Bundesfinanzhof (BFH)) issued a landmark ruling (IX R 25/19) that changed this. The BFH held that taxpayers are free to use any appropriate method to demonstrate a shorter useful life.
There is no restriction to a specific type of report. What matters is whether the method plausibly shows the technical wear, economic obsolescence, or legal limitations affecting the building.
The BFH confirmed this approach again in January 2024 (IX R 14/23), accepting a report that used the methodology of the German Real Estate Valuation Ordinance (Immobilienwertermittlungsverordnung, or ImmoWertV) to estimate remaining economic useful life.
What kind of property qualifies for a shorter depreciation period?
The following factors can contribute to a shorter remaining useful life. Hence, a shorter depreciation period.
- Technical wear: deterioration of load-bearing structures, roofing, plumbing, electrical systems, windows
- Economic obsolescence: outdated layout, location decline, poor energy efficiency, making the building increasingly unlettable
- Legal restrictions: planning constraints that limit the building’s usable life
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The following types of buildings usually qualify for shorter depreciation.
- Older buildings in North and East Germany, where heavy concrete panel construction (Plattenbau) was common, often qualify.
- Mixed-use buildings with commercial tenants,
- Properties in structurally weak areas, and
- Heavily neglected buildings.
NOTE: Only the building component can be depreciated. You cannot depreciate the land on which the building is constructed.
What do you need to claim a shorter depreciation?
You need a written expert report (Gutachten) that:
- Is based on an on-site inspection of the property
- Sets out the remaining useful life with a clear, reasoned estimate
- Addresses the specific condition and characteristics of your building — not just model values
- Is prepared by a qualified appraiser (a publicly appointed and sworn specialist remains the safest choice, though the BFH no longer requires one exclusively)
Simple online-only reports without a site visit are unlikely to be accepted. The tax office can still reject a report it considers implausible. Moreover, the burden of proof lies with you as the property owner.
The good news is that you can recoup the cost of creating the report within a year or two. It is thanks to the increased depreciation.
Can you apply for a shorter depreciation retroactively?
Yes, you can apply the shorter depreciation period retroactively to all your open tax assessment years. In most cases, going back to 2022.
You have to file an amended return (berichtigte Steuererklärung) via ELSTER or through your tax advisor.
We recommend consulting a tax advisor for personalized advice.
