Depreciation, known in Germany as Absetzung für Abnutzung (AfA), is one of the most important tax instruments for property investors. It allows you to deduct the building's loss in value over the years, significantly reducing the tax burden on your rental income. Our depreciation calculator determines the annual write-off and the resulting tax saving.
How to Use This Calculator
The calculator separates the depreciable building portion from the non-depreciable land portion and derives your tax relief. Here's how to proceed:
- Step 1: Enter the purchase price of the property.
- Step 2: Enter the closing costs, as these proportionally increase the depreciation base.
- Step 3: Set the building share of the purchase price. The land portion is not depreciable; 70-85% is common.
- Step 4: Choose the depreciation rate. Buildings constructed from 1925 onwards use 2%, older ones 2.5%, and new builds from 2023 may use 3%.
- Step 5: Enter your personal tax rate to estimate the annual saving.
Understanding the Results
The calculation shows how much you can write off each year and how much this reduces your tax burden:
- Building Value (Depreciation Base): The depreciable portion of the purchase price and closing costs after deducting the land share.
- Annual Depreciation: The amount you can deduct from rental income as expenses each year.
- Monthly Depreciation: The annual depreciation broken down per month.
- Annual Tax Saving: The estimated reduction in your tax burden, calculated from the depreciation multiplied by your personal tax rate.
- Total Tax Saving Over Useful Life: The cumulative tax saving over the entire depreciation period, calculated from the annual saving multiplied by the number of years.
- Depreciation Period: The number of years over which the building is fully depreciated.
Why Depreciation Matters for Investors
Depreciation is a non-cash expense: it reduces your tax burden without any actual money leaving your account. This creates a significant tax-deferral and leverage effect that can substantially improve the net return of a rental property. With a building value of 240,000 euros and a 2% depreciation rate, you can write off 4,800 euros per year. At a 42% tax rate, that equals an annual tax saving of roughly 2,016 euros. Over the full useful life, this effect adds up to a six-figure sum. The key is a high yet realistic and well-documented split between the building and land portions, since only the building can be depreciated. Experienced investors ensure a favorable purchase price allocation already in the purchase contract.
Tips
- •Document the split between building and land portions carefully. A higher building share increases the depreciation base and therefore your tax saving.
- •Check the construction year precisely: buildings before 1925 are depreciated at 2.5% over 40 years, newer ones at 2% over 50 years. Residential buildings completed after 2022 qualify for an increased 3% rate.
- •Closing costs such as property transfer tax and notary fees also proportionally increase the depreciation base and should be included in the calculation.