What depreciation (AfA) is
AfA stands for Absetzung für Abnutzung – depreciation for wear and tear. A building loses value over the years, so you cannot deduct its cost all at once in the year of purchase, but spread over its useful life. For rental property, depreciation is part of the income-related expenses in Anlage V (Section 9 (1) sentence 3 no. 7 of the Income Tax Act, EStG).
Only the building can be depreciated. Land does not wear out and is therefore left out.
Which rate applies
The straight-line rate depends on when the building was completed – not on when you buy it (Section 7 (4) sentence 1 no. 2 EStG). For a house built in 1990 that you buy in 2026, the rate is 2% per year.
Each rate reflects a statutory useful life: 3% corresponds to 33 years, 2% to 50 years and 2.5% to 40 years.
Depreciation rates for buildings
| Building | Rate per year | Useful life | Legal basis |
|---|---|---|---|
| Completed before 1925 | 2.5% | 40 years | Section 7 (4) sentence 1 no. 2 letter c EStG |
| Completed 1925 to 2022 | 2.0% | 50 years | Section 7 (4) sentence 1 no. 2 letter b EStG |
| Completed from 2023 | 3.0% | 33 years | Section 7 (4) sentence 1 no. 2 letter a EStG |
| Residential building, construction start 1 Oct 2023 to 30 Sept 2029 | 5.0% of remaining value | – | Section 7 (5a) EStG |
How to work out the cost basis
The starting point is the purchase price and the purchase costs: real estate transfer tax, notary, land registry and agent. You split the purchase costs between building and land in the same ratio as the purchase price. Financing costs such as interest or commitment fees are not included – they are deductible immediately.
You can estimate the land share, for example, as the standard land value times the plot area, or use the split in the purchase contract. The Federal Ministry of Finance provides a tool for splitting the purchase price. How the tax office splits it in a given case depends on the circumstances.
Cost basis = (purchase price + purchase costs) × building share × rented share
Land cannot be depreciated. For a condominium, work out your share of the land value, for example: plot 1,200 m² × standard land value €500/m² × co-ownership share 85/1,000 = €51,000. With a purchase price of €300,000 that is 17% – not 8.5%.
Worked example: purchase in July
In the year of acquisition, depreciation is only pro rata: for each full month before the month of acquisition one twelfth is dropped (Section 7 (1) sentence 4 EStG). The month of acquisition itself counts in full. What matters is the transfer of possession, benefits and burdens, not the notary appointment.
- Purchase price €400,000 plus €40,000 purchase costs = €440,000 acquisition costs.
- Land share 25%, so building share 75%: €440,000 × 75% = €330,000 cost basis.
- Completed in 1990, so 2% per year: €330,000 × 2% = €6,600 full annual depreciation.
- Transfer in July 2026: July to December is 6 months, so €6,600 × 6/12 = €3,300 for 2026.
- From 2027 to 2075 €6,600 each year, in 2076 the remaining €3,300. Together that is exactly €330,000.
Declining-balance depreciation and special depreciation for new builds
For new residential buildings in the EU or EEA, Section 7 (5a) EStG allows declining-balance depreciation of 5% of the remaining value. Construction must start after 30 September 2023 and before 1 October 2029 – the date in the construction start notice counts. For a purchase, the contract must be signed in that period and you must acquire the building by the end of the year of completion.
Because the rate applies to the remaining value, the amount falls from year to year. Switching to straight-line depreciation is allowed. Which option works better for you depends on your personal tax rate – the calculator shows both series side by side but makes no recommendation.
New rental flats may also qualify for special depreciation under Section 7b EStG: up to 5% in the year of acquisition or construction and the three following years, on top of regular depreciation. Requirements include a building application after 31 December 2022 and before 1 October 2029, the Efficiency House 40 standard with QNG certification and construction costs of no more than €5,200 per square metre of living space. The calculator does not calculate Section 7b.
The tax office decides whether the requirements are met. Agree the choice with your tax adviser.
Shorter useful life with evidence
If a building's actual useful life is shorter than 33, 50 or 40 years, you can base depreciation on that shorter period (Section 7 (4) sentence 2 EStG). Evidence is usually provided by an expert report. With a useful life of 30 years you spread the cost basis evenly over 30 years.
Whether the tax office accepts the report depends on the individual case. Enter the useful life under “More assumptions” in the calculator to see the effect.
Common mistakes
- Choosing the rate by year of purchase instead of year of completion.
- Depreciating the land share or forgetting the purchase costs.
- Using the notary appointment instead of the transfer of possession, benefits and burdens as the start.
- Overlooking renovations soon after purchase: if renovation costs excluding VAT in the first three years exceed 15% of the building's acquisition costs, they count as acquisition-related production costs and increase the cost basis (Section 6 (1) no. 1a EStG).
- Claiming full depreciation when you use part of the property yourself. You can only depreciate the rented part.
- Starting afresh after a gift or inheritance. In that case you continue the previous owner's depreciation (Section 11d EStDV) – the calculator does not cover this case.