Anyone investing in real estate - whether for rental or as a capital investment - can benefit from tax advantages through targeted depreciation. The so-called "depreciation for wear and tear" (AfA) reduces the tax burden and improves the return. But how does depreciation work and what should owners pay attention to?
Basic principle of depreciation
The acquisition costs of a property are spread over its useful life for tax purposes. For residential buildings, this is 50 years - resulting in an annual straight-line depreciation of 2 % on the building portion. The value of the land is excluded from this and must be determined separately.
Special depreciation possible
Increased depreciation is possible for listed buildings or particularly energy-efficient new buildings - in some cases up to 9 % in the first few years. Refurbishment costs can also be written off under certain conditions. Individual tax advice is worthwhile here in order to fully exploit the potential.
Requirements and evidence
Letting is a basic prerequisite for tax claims. Owners should keep all receipts and appraisals carefully in order to be able to demonstrate to the tax office what proportion of the building was depreciated. Conversions and modernizations after purchase can also be written off - but not immediately in full.
Conclusion
Depreciation is an effective instrument for optimizing taxes on rented properties. If you plan carefully and take advantage of the tax framework, you can significantly reduce your annual tax burden and improve your return.
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