(2023) Who is eligible for the special depreciation under Section 7b of the Income Tax Act?

Special depreciation for rental properties: To stimulate the construction of new rental properties in the lower and middle price segments, a temporary special depreciation under § 7b EStG was introduced in 2019 and relaunched in 2022.

Depreciation for building applications between 1.9.2018 and 31.12.2021:

• 5% special depreciation on acquisition or production costs up to 2,000 Euro per sqm of living space in the year of acquisition and the following three years.
• Eligible buildings with construction costs up to 3,000 Euro per square metre of living space, eligible up to 2,000 Euro.
• The property must be rented for at least 10 years, with no rent cap.
• The deadline is 31.12.2021, and building applications must have been submitted between 1.9.2018 and 31.12.2021.

Depreciation for building applications between 1.1.2023 and 31.12.2026:

• Eligible building applications between 1.1.2023 and 31.12.2026.
• 5% special depreciation on acquisition or production costs up to the eligible assessment basis in the first four years.
• Building costs up to 4,800 Euro per sqm of living space, eligible up to 2,500 Euro.
• Purchase required by the end of the year of completion.
• Requirement is an "Efficiency House 40" with sustainability class/efficiency building level 40.

Practical tips:

• Monitor possible changes in cost reference values (2,500 Euro / 4,800 Euro).
• De minimis regulation applies to income from profits, not to income from renting and leasing.
• New apartments from 2022 are excluded from § 7b EStG.