How much is real estate depreciation (AfA) in Germany?

For residential buildings built from 1925 onward, depreciation is 2 % per year (50 years). For new builds from 2023, 3 % straight-line or 5 % declining-balance applies. Listed buildings can be depreciated at up to 9 % annually (§ 7i EStG).

What counts towards the depreciation base for real estate?

The depreciation base includes the purchase price plus incidental purchase costs (notary, property transfer tax, agent) minus the land share. Later production costs also increase the base.

Can renovation costs on real estate be depreciated?

Maintenance expenses (new windows, bathroom renovation) are immediately deductible as income-related expenses. Production costs such as extensions or loft conversions are depreciated over 50 years. Note: renovations exceeding 15 % of the building value within the first 3 years count as production costs.

Real Estate Depreciation (AfA): Calculation, Rates & Example

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What is depreciation (AfA) for real estate?

Key Facts -

What is depreciation (AfA) for real estate?

Depreciation rates at a glance

Calculating depreciation: step by step

Determining the land share

Declining-balance depreciation for new builds

Renovations and depreciation

AfA stands for Absetzung für Abnutzung (depreciation for wear and tear). Landlords can depreciate the acquisition cost of a building for tax purposes over many years. The building loses value through use — this loss in value reduces taxable income. Only the building is depreciated, not the land.

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Depreciation rates at a glance

Building type	Depreciation rate	Duration	Legal basis
Residential building (built from 1925)	2.0 % p.a.	50 years	§ 7 (4) EStG
Residential building (built before 1925)	2.5 % p.a.	40 years	§ 7 (4) EStG
New-build rental (from 2023)	3.0 % p.a.	33 years	§ 7 (4) new
Declining-balance depreciation, new build	5.0 % p.a.	Freely selectable	§ 7 (5a) EStG
Listed building (landlord)	9 % × 8 yrs + 7 % × 4 yrs	12 years = 100 %	§ 7i EStG

Calculating depreciation: step by step

Purchase price: €500,000 | Year built 1985 | Location: mid-sized town

Step	Calculation	Result
Total cost (incl. incidental costs)	Purchase price + notary + property transfer tax + agent	€535,000
Deduct land share	25 % (mid-sized town location)	– €133,750
Depreciation base (building share)	535,000 – 133,750	€401,250
Depreciation per year (2 %)	401,250 × 0.02	€8,025 / year
Tax saving (42 % tax rate)	8,025 × 0.42	€3,370 / year

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Determining the land share

The German tax office recognises three methods:

Standard land value method: the most precise method – ratio of (standard land value × plot size in m²) to the total purchase price.
Federal Ministry of Finance working aid: a free Excel tool from the tax administration (search term: “Arbeitshilfe Kaufpreisaufteilung”).
Flat rate of 20–30 %: depending on location – not always accepted by the tax office.

Declining-balance depreciation for new builds

Since 2023, investors in new builds (completed from 1 January 2023) can choose between 3 % straight-line and 5 % declining-balance depreciation:

5 % of the respective remaining book value → higher depreciation at first, then decreasing.
A one-off switch from declining-balance to straight-line is possible – not the other way round.
Worthwhile if you have high taxable income in the early years.

Renovations and depreciation

Maintenance expenses (windows, bathroom): immediately deductible as income-related expenses.
Production costs (extension, loft conversion): increase the depreciation base → depreciated over 50 years.
15 % threshold: renovations exceeding 15 % of the building value within the first 3 years after purchase count as production costs (§ 6 (1) No. 1a EStG).