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Depreciation for the building
Depreciation in accordance with sect. 7 para. 4 of the Income Tax Act (EStG) is as follows:
- 2,5% per year for buildings completed before 1 January 1925
- 2% per year for buildings completed after 31 December 1924 and before 1 January 2023
- 3% annually for buildings completed after 31 December 2022
of the acquisition or production costs of the building. In exceptional cases, you can claim higher depreciation if the actual service life is shorter. A shorter service life must be justified and proven.
Notwithstanding this, you can apply declining balance depreciation to a building or flat in Germany or in an EU/EEA country in accordance with sect. 7 para. 5 of the Income Tax Act (EStG).
The amounts are as follows:
- Before 1 January 1995: 8 years 5% each, 6 years 2.5% each, 36 years 1,25% each
- Before 1 January 1996 (residential use): 4 years 7% each, 6 years 5% each, 6 years 2% each, 24 years 1,25% each
- After 31 December 1995 and before 1 January 2004 (residential): 8 years 5% each, 6 years 2.5% each, 36 years 1,25% each
- After 31 December 2003 and before 1 January 2006 (residential): 10 years 4% each, 8 years 2.5% each, 32 years 1,25% each
The calculation begins with the building application (in the case of construction) or the legally effective conclusion of the obligatory contract before the specified date.
Degressive depreciation for residential buildings: Since 1 October 2023, a degressive depreciation has been in force for rented residential buildings if construction begins or the purchase agreement is concluded between 1 October 2023 and 30 September 2029. The prerequisite is that the building is acquired by the end of the year of completion. The declining balance depreciation amounts to 5% of the respective residual value (sect. 7 para. 5a of the Income Tax Act (EStG)).
There is an option to switch to linear depreciation at any time. As long as the declining-balance depreciation is applied, deductions for exceptional technical or economic wear and tear are not permitted. However, if such wear and tear occurs, it is possible to switch to linear depreciation.
The declining balance method of depreciation can be claimed for all residential buildings located in a member state of the European Union or the European Economic Area.
