Double Depreciation in German Real Estate: A Hidden Tax Advantage for Investors
- ronaldsena
- Sep 5, 2025
- 3 min read
Real estate investment in Germany comes with a variety of tax benefits — but one of the most overlooked is the opportunity for double depreciation (doppelte Abschreibung). If used correctly, this strategy can significantly lower taxable income and boost net returns. But what exactly is double depreciation, and who can take advantage of it?
What Is Depreciation in Real Estate?
In Germany, buildings (but not land) can be depreciated over time to reflect wear and tear. For most residential buildings constructed after 1924, the standard linear depreciation rate is 2% per year over 50 years. For older properties (built before 1925), the rate is 2.5% over 40 years.
This depreciation (known as Absetzung für Abnutzung, or AfA) reduces your taxable rental income — making it a powerful tool for tax planning.
What Is Double Depreciation?
Double depreciation refers to the ability to claim two separate depreciation amounts on the same property under certain conditions:
Depreciation of the Building Structure: As mentioned above, this is the standard AfA based on the building's age.
Depreciation of Renovation Costs: If you renovate or modernize a property shortly after purchase, the renovation costs can also be depreciated — separately from the building’s original value.
This essentially allows investors to "depreciate the property twice": once for the original structure, and again for the modernization investment.
Key Conditions for Claiming Double Depreciation
To benefit from this, several criteria must be met:
The property must be income-generating (i.e., rented out).
Renovation must occur within 3 years after the purchase date.
The total renovation costs must exceed 15% of the building’s purchase price (excluding land).
Renovation costs must qualify as “modernization” (e.g., new windows, heating systems, insulation, bathrooms). Routine maintenance doesn't count.
Once these conditions are fulfilled, renovation costs can be depreciated linearly over 5 or 15 years, depending on the type of work done.
Example: How It Works
Let’s say you purchase a residential rental building (constructed in 1975) for €500,000. The building portion (excluding land) is valued at €400,000.
Standard depreciation (AfA): €400,000 × 2% = €8,000/year
Renovation investment: You spend €90,000 on modernization in the first 2 years (which is over 15% of the €400,000 building value)
Renovation depreciation: €90,000 ÷ 15 years = €6,000/year
Total depreciation claimable annually:€8,000 (building) + €6,000 (renovation) = €14,000
This €14,000 can be deducted from your rental income each year, significantly reducing your taxable profit.
Why It Matters for Investors
Higher tax deductions = more cash flow
Accelerated depreciation of renovation costs reduces your taxable income more quickly.
Double depreciation can make value-add strategies even more attractive, particularly in older properties that require modernization.
Important Considerations
Always separate land and building values properly in the purchase contract.
Keep detailed records and invoices of renovation work.
Use a tax advisor experienced in real estate to ensure compliance and optimize your depreciation schedule.
Final Thoughts
Double depreciation is a powerful — yet underutilized — tool in German real estate investing. For those pursuing buy-and-renovate strategies, especially in energy-inefficient or older apartment blocks, it can create a major tax advantage.
Whether you're planning to hold long-term or sell after value creation, using double depreciation smartly can significantly improve your investment’s net performance.
Get in touch today and we will help you find your next property to take advantage of this!
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