Lohnsteuerkompakt

Select "yes" if you want to enter special depreciation for monuments or buildings in redevelopment areas.

According to sect. 7h of the Income Tax Act (EStG), you may, for measures within the meaning of sect. 177 of the Building Code (BauGB) which have been carried out on buildings in a formally defined redevelopment area or urban development area, apply increased special depreciation for modernisation and repair work instead of the depreciation which has to be calculated according to sect. 7 paras. 4 and 5 of the Income Tax Act (EStG).

Special depreciation includes

• Renovation building according to sect. 7h of the Income Tax Act (EStG): In the case of construction measures started before 1 January 2004, the production costs can be distributed over 10 years at an annual rate of 10%.
• In the case of construction measures started on or after 1 January 2004, production costs can be deducted as income-related expenses at 9% for each of the first eight years and 7% for each of the following four years.
• Architectural monuments according to sect. 7i of the Income Tax Act (EStG): Regulation as for sect. 7h of the Income Tax Act (EStG).

Select "yes" if you want to enter special depreciation for the object in accordance with sect. 7b of the Income Tax Act (EStG) (new rental property construction).

According to sect. 7b of the Income Tax Act (EStG), you can claim special depreciation of up to 5% of the tax base per year in addition to the linear depreciation for wear and tear according to sect. 7 para. 4 of the Income Tax Act (EStG) for the acquisition or construction of new flats in the year of acquisition or construction and in the following three years.

Construction measures that create new, previously non-existent flats on the basis of a building application submitted after 31 August 2018 and before 1 January 2022 or a building announcement made during this period are favoured. For rental flats that can be built without a building application or building notification according to the building regulations, the time period mentioned can be based on the time of the start of construction (Federal Ministry of Finance (BMF) letter dated 21.09.2021).

The prerequisite for the claim is that

• the flat is situated in a member state of the European Union, and
• the acquisition or construction costs of this flat do not exceed 3.000 Euro per square metre of living space and
• the flat is made available for residential use against payment in the year of acquisition or construction and in the following nine years.

The assessment basis for special depreciation may not exceed 2.000 Euro per square metre of living space. The special depreciation according to sect. 7b of the Income Tax Act (EStG) is a de minimis subsidy. It is only granted if the requirements of the de minimis regulation are met. For this purpose, the information on the amount of further de minimis subsidies that you have received in the previous two assessment periods as well as in the current assessment period is required.

Depreciation for building applications between 01.01.2023 and 31.12.2026: The special depreciation under sect. 7b of the Income Tax Act is intended to incentivise the construction of rental flats. In detail, the following now applies:

• Rental flats for which the building application is submitted between 1 January 2023 and 31 December 2026 or a corresponding building notification is submitted are entitled.
• The special depreciation amounts to 5 percent of the acquisition or production costs up to the eligible assessment basis in each of the first four years. In addition, straight-line depreciation of 2 percent p.a. is deductible, although this is based on a different assessment basis, namely the actual acquisition or production costs.
• Acquisition or production costs of up to 4.000 Euro per square metre of living space are eligible under sect. 7b of the Income Tax Act (EStG).
• Buildings with construction costs of no more than 5.200 Euro per square metre of living space are eligible under sect. 7b of the Income Tax Act (EStG).
• The purchase of such a flat is eligible if the purchaser legally acquires the building or the new flat by the end of the year of completion.

To qualify for the special depreciation allowance, the requirements for the home are linked to certain efficiency standards. For example, the utilisation of the special depreciation allowance is dependent on the building in which the new home is constructed fulfilling the criteria for an "Efficiency House 40" with sustainability class/efficiency building level 40.

Tip: In view of the dynamic and difficult-to-predict development of construction costs in particular, there may be a need to amend the cost reference values (4.000 Euro / 5.200 Euro) in the future. The legislator has already pointed this out in the explanatory memorandum to the law.

Tip: The requirements for so-called de minimis aid must be met. However, the rules on compliance with the de minimis regulation are limited to beneficiaries who generate profit income and are therefore engaged in business activities. This means that beneficiaries with income from renting and leasing do not have to comply with the requirements of state aid law.

Tip: New flats that are built in 2022 on the basis of a building notification or a building application are excluded from the scope of application of sect. 7b of the Income Tax Act (EStG).

You must determine the depreciation for movable assets that are not buildings (e.g. fitted kitchen) in accordance with sect. 7 para. 1 of the Income Tax Act (EStG) on the basis of the normal useful life.

Smaller assets that cost no more than 800 Euro (excluding VAT) can be fully deducted in the year of purchase.

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.