Loan Discount (Disagio)
Loan discount (Disagio) in property financing: Definition, tax treatment, and impact on the effective interest rate.
Financial
§ 11 Abs. 2 EStG
Also known as: discount, damnum, upfront deduction
A Disagio (also called Damnum or discount) is a deduction from the nominal loan amount at the time of disbursement. For example, if a loan of EUR 100,000 is agreed with a 5% Disagio, the borrower receives only EUR 95,000 but must repay EUR 100,000. For tax purposes, a Disagio on rented properties can be claimed as income-related expenses (Werbungskosten) under German tax law. (§ 11 Abs. 2 EStG)