Linear or degressive AfA: how to compare depreciation timing

Degressive AfA does not give you more depreciation than linear AfA. It gives you the same total sooner. For a residential building that qualifies under § 7(5a) of the Income Tax Act (Einkommensteuergesetz, EStG), you can deduct 5 per cent of the building's remaining book value each year instead of 3 per cent of its original cost. The declining-balance deduction is larger for about the first decade and smaller afterwards, and a one-way switch to straight-line finishes the same basis at the same point. Eligibility comes first, and most apartments on the market do not qualify.

Depreciation (Absetzung für Abnutzung, AfA) is a deduction against rental income for the building's wear, not a payment and not a refund. For the wider tax picture, see our overview of rental property tax benefits. To build the schedule from your purchase documents, see how to calculate an AfA schedule.

The declining-balance option replaces the 3 per cent straight-line rate for residential buildings completed from 1 January 2023 (§ 7(4) sentence 1 no. 2(a) EStG). Under § 7(5a) sentence 1, all of the following must hold:

• Residential use. The option applies to the extent the building is used for housing, and the building must be in an EU or EEA state.
• Your own construction, or a purchase by the end of the completion year. A buyer must acquire the building, in practice through the transfer of benefits and burdens (Übergang von Nutzen und Lasten), by 31 December of the year it is completed.
• Dates inside the window. For a self-build, construction must start after 30 September 2023 and before 1 October 2029, using the date in the construction-start notice (Baubeginnsanzeige) required under state law (sentence 2). For a purchase, the binding purchase contract must become legally effective within the same window.

The same paragraph fixes the mechanics. The rate is an unchangeable 5 per cent of the current book value (Restwert) (sentence 4). The first year is cut by one-twelfth for each full month before the month of acquisition (sentence 5, applying § 7(1) sentence 4). While declining-balance is used, no deduction for extraordinary wear and tear (AfaA) is allowed (sentence 6).

That excludes a great deal: an apartment bought in any year after the building's completion, however new; a new build bought under a contract signed before 1 October 2023; and every resale flat in an older building. Apartment A from our other examples, a Leipzig flat in a 1996 building, has no choice to make. It depreciates at 2 per cent straight-line.

Both methods start from the same depreciable basis: the building's share of the price plus its share of the purchase costs. Land is excluded, so the land–building allocation (Kaufpreisaufteilung) sets the ceiling for both (why the split changes your AfA).

• **Straight-line (lineare AfA):** 3 per cent of the original basis each year, a constant amount, until the basis is used up after 33 years and four months.
• **Declining-balance (degressive AfA):** 5 per cent of whatever remains at the start of each year. The amount falls every year and, on its own, never reaches zero.

That last point is why the switch matters.

The law allows a move from declining-balance to straight-line (§ 7(5a) sentences 7 and 8 EStG). After the switch, the remaining value is depreciated at the § 7(4) percentage that reflects the remaining useful life (Restnutzungsdauer). In practice: remaining value divided by the years of useful life left.

This gives a simple trigger. Declining-balance deducts 5 per cent of the remaining value; spreading that value over the remaining life deducts more than 5 per cent once fewer than 20 years are left. With a useful life of 33 years and four months, that happens 13 years and four months after acquisition. Switching earlier or later only moves deductions into later years.

The switch runs one way. Section 7(5a) provides a route from declining-balance to straight-line and none back, and a move from straight-line to declining-balance is generally treated as unavailable (for movable assets, § 7(3) sentence 3 says so expressly). In practice, the declining-balance choice is made in the first year's return.

One point the statute leaves open is whether the remaining life is counted from 33 years and four months, which is what 3 per cent implies, or from 33 years. In a worked example on the parallel rule after special depreciation, the Federal Finance Ministry counted 33 years (BMF letter of 21 May 2025, example 7). The example below uses 33 years and four months and shows what changes on the other reading.

Illustrative example. Fictional figures, not a real property, offer or tax calculation. Apartment B, the Leipzig new build from our new-build comparison: 50 m², bought off-plan from a developer (Bauträger) for €250,000. Purchase costs 7.5 per cent, €18,750 (transfer tax, notary and land registry; no agent). Land share 15 per cent, so the depreciable building basis is 85 per cent of €268,750: €228,437.50. Building application filed in 2024; notarised purchase contract legally effective on 6 March 2025, inside the window; completion and transfer of benefits and burdens on 1 November 2026, so the apartment is acquired in its completion year. Let as an ordinary long-term rental from completion. Tax years are calendar years; 2026 counts two months. Useful life 33 years and four months, ending in February 2060. Switch to straight-line at the start of 2041. No special depreciation under § 7b in either column.

At the switch, €110,475 remains and 19 years and two months of useful life are left: €110,475 ÷ 230 months × 12 = €5,764 a year. Amounts rounded to whole euros.

Differences calculated before rounding. Tax value assumes a constant 42 per cent marginal income-tax rate, excluding solidarity surcharge and church tax.

What the tables show:

• In the first full year, declining-balance deducts €11,327 against €6,853.
• From 2037 its annual deduction is the smaller of the two. Its cumulative lead peaks at the end of 2036 and shrinks every year after that.
• Both columns reach exactly €228,437.50 in February 2060. Higher early deductions do not create extra lifetime deductions.
• Without the switch, about €39,600 would still be undeducted at the end of 2060.
• On the 33-year reading, the switch would come in 2040 at about €5,863 a year, and the basis would be used up in 2059. The total is unchanged.

At a constant 42 per cent marginal rate, both schedules reduce income tax by the same €95,944 over their lives. Only the timing differs: by the end of year 10, the declining route has reduced tax by about €9,595 more; by year 20, by €6,481 more; by 2060, by nothing more.

That lead has time value, but less than the early figures suggest. Discounting each year's tax effect at an assumed 3 per cent a year, the declining route is worth about €3,700 more in today's money; at 2 per cent, about €2,800; at 5 per cent, about €4,900. Whether you actually capture it depends on what the schedule does not show:

• Your marginal rate over time. If you expect a higher rate later, later deductions may be worth more, not less. A deduction only reduces tax you would otherwise pay, so an owner with little German-taxed income gains less, or later, from a larger early deduction.
• A sale within ten years. Depreciation claimed reduces the cost used to calculate a taxable gain on a private sale within ten years (§ 23(3) sentence 4 EStG), so higher early deductions can return as a larger gain (selling after ten years).
• Cash flow. The mortgage payment is the same under both methods. Because declining-balance deductions fall each year, taxable rental profit rises sooner, which belongs in the long-term budget (when temporary deductions fall away).

Special depreciation under § 7b EStG can be claimed alongside either method if its separate conditions are met, and after its four years the remaining value is depreciated under § 7a(9) EStG, which changes both schedules above. Our Sonder-AfA guide runs the same Apartment B through those conditions.

Eligibility turns on dates, so the evidence is mostly paper:

• the notarised purchase contract and the date it became legally effective;
• the completion date and the date benefits and burdens passed, usually in the handover record;
• the construction-start notice, if you build yourself;
• the building application (Bauantrag), which matters for § 7b rather than § 7(5a);
• the land–building allocation and the purchase-cost invoices.

If you are buying a new-build apartment in Berlin, Dresden or Leipzig, Alpha Minoris's Buyer's Agent service collects these dates and documents during the purchase, so your tax adviser (Steuerberater) can evaluate eligibility and the choice of method before the first return. You need not live in any of the three cities. Whether the building qualifies, and which method to elect, remains a matter for your adviser and the tax office.

Before choosing a method, confirm eligibility from the contract and completion dates, then compare both schedules with your Steuerberater. Discuss your first rental property with Alpha Minoris.