What is building depreciation (AfA)?
When you rent out a property, you can claim the annual loss in value of the building against tax – as depreciation (AfA, Absetzung für Abnutzung). AfA reduces your rental income and directly lowers your tax liability. Only the building portion is depreciable – not the land. Land is considered non-depreciable under German tax law.
How is AfA calculated?
The legislator sets a standard useful life – typically 50 years for residential buildings (2% per year). If the actual remaining useful life of your property is shorter, you can claim a higher depreciation rate. This requires an accepted appraisal pursuant to §7 para. 4 sentence 2 EStG (BFH ruling IX R 25/19 of 28.07.2021).
What are the acquisition costs?
The AfA basis is not simply the purchase price, but the total acquisition costs of the building. These consist of the purchase price (excluding land) plus all ancillary acquisition costs attributable to the building:
- Notary and land registry fees
- Real estate transfer tax (Grunderwerbsteuer)
- Estate agent commission
- Other acquisition costs (e.g. travel costs, appraisal costs in foreclosure proceedings)
