(2023) New special depreciation for rental properties

The "Act on the Tax Promotion of New Rental Housing" of 4 August 2019 introduced a temporary special depreciation under § 7b EStG to promote investment in new rental housing. This applied to investments for which a building application was submitted or a building notice was made between 1 September 2018 and 31 December 2021.

• The 7b special depreciation amounted to 5% of the acquisition or production costs in each of the first four years, up to 2,000 Euro per square metre of living space.
• An additional linear depreciation of 2% per year was deductible, but based on the actual acquisition or production costs (§ 7 para. 4 EStG).
• Only buildings with construction costs of no more than 3,000 Euro per square metre of living space were eligible.
• The subsidised property had to be rented out for at least 10 years, with no rent cap.

From 1 January 2023, the expired 7b special depreciation will be renewed. It now applies to rental housing for which a building application is submitted or a building notice is made between 1 January 2023 and 31 December 2026, provided certain (energy) efficiency requirements are met.

• The 7b special depreciation amounts to 5% of the acquisition or production costs in each of the first four years up to the eligible assessment basis.
• An additional linear depreciation of 2% per year is also possible, but based on the actual acquisition or production costs.
• Eligible acquisition or production costs are up to 2,500 Euro per square metre of living space.
• Construction costs must not exceed 4,800 Euro per square metre of living space.