Why Real Estate Is a Tax-Smart Move in Germany
- ronaldsena
- Aug 8, 2025
- 2 min read
Germany offers several unique tax benefits for property owners, especially those who rent out their properties:
Depreciation (AfA – Absetzung für Abnutzung): You can deduct a portion of your property's value annually from your taxable income. This applies to the building (not the land) and typically spans 50 years at 2% per year.
Special Depreciation Allowances: For newly built or energy-efficient properties, additional depreciation options may apply, allowing for faster write-offs and bigger tax savings.
Interest Deduction: Mortgage interest payments are fully deductible against rental income, reducing your taxable profit.
Capital Gains Tax Exemption If you hold the property for more than 10 years, any profit from its sale is tax-free—even if you’ve moved abroad.
🧾 What You Can Deduct
Here’s a breakdown of common deductible expenses:
Expense Type | Deductible? | Notes |
Mortgage Interest | ✅ | Fully deductible against rental income |
Property Management Fees | ✅ | Includes agent and maintenance costs |
Repairs & Renovations | ✅ | Must be classified as maintenance, not upgrades |
Depreciation (AfA) | ✅ | 2% annually over 50 years |
Insurance & Utilities | ✅ | If paid by the landlord |
Travel Costs (Property Visits) | ✅ | If properly documented |
🏘️ Real-Life Strategy: Buy-to-Let in Berlin
Imagine buying a €500,000 rental property in Berlin. You’d pay around €30,000 in real estate transfer tax (Grunderwerbsteuer at 6%). But over the years, you could offset:
€10,000+ annually in depreciation and interest
Thousands more in maintenance and management costs
Hold it for 10+ years, and your capital gains are tax-free. That’s a long-term win.
📌 Pro Tips for Maximizing Savings
Refinance Strategically: A cash-out refinance keeps interest payments high (and deductible) while freeing up capital for other investments.
Use a Tax Advisor: German tax law is complex. A professional can help you optimize deductions and avoid pitfalls.
Plan Your Exit: Selling after 10 years unlocks the capital gains exemption—timing matters.
Germany’s tax system may seem daunting, but for real estate investors, it’s full of hidden gems. With the right strategy, your rental property can be more than a passive income stream—it can be a powerful tax shield.
Looking for a new property? Get in touch today!
+4917626909854
