How property depreciation works: build an AfA schedule from the purchase documents

A property depreciation calculation in Germany needs four things, and your purchase documents contain all of them: the building's acquisition cost (price plus purchase costs, minus the land), a rate set by the building's completion date, the month in which the property passed to you, and a running balance of what is left. For a resale apartment in a building completed between 1925 and 2022, you deduct 2 per cent of the building's acquisition cost each year until it is used up. In the first year, you lose one twelfth for each full month before the month you took over.

This guide turns one fictional apartment's documents into a complete schedule. Why depreciation matters for your tax at all is covered in rental property tax benefits in Germany.

Depreciation (Absetzung für Abnutzung, AfA) spreads the cost of the building over its assumed life. Each year's slice is an income-related expense (Werbungskosten) set against your rent (§ 9(1) sentence 3 no. 7 EStG). Three things follow from that:

• It is not a payment. You paid for the building when you bought it. The annual AfA moves no money.
• It is not a refund. It reduces taxable income. What it is worth depends on your marginal tax rate, and it arrives with your tax assessment.
• It is not a valuation. The remaining balance in your schedule is a tax figure. It says nothing about what the apartment would sell for.

Illustrative example. Fictional figures, not a real property or an individual tax calculation. A two-room, 65 m² resale apartment in Leipzig, in a building completed in 1996, let under an existing lease that continues after the sale. Price €240,000. Contract notarised on 15 January 2026; benefits and burdens pass on 1 April 2026. The contract allocates 25 per cent of the price to the land and nothing separately to furniture, a kitchen or the owners' association's reserve. Loan €216,000, secured by a land charge (Grundschuld). One owner, letting throughout; all purchase invoices paid in 2026. Illustrative marginal income-tax rate: 42 per cent.

The transfer tax rate depends on the state; Saxony charges 5.5 per cent (SächsGrEStSatzG). The notary's invoice often mixes purchase and land-charge items, and land-registry invoices can arrive months later. Sort them line by line.

Acquisition costs are what you spend to acquire an asset, including incidental costs (Anschaffungsnebenkosten) (§ 255(1) HGB). The tax administration of North Rhine-Westphalia lists the agent's commission, the transfer tax, the notary's fee for the purchase contract and the land-registry fee for the change of ownership as part of the depreciation base (Finanzverwaltung NRW). Three points then change the figure:

• Land-charge costs are financing costs. Notary and land-registry fees for registering the bank's land charge are not acquisition costs. They are financing costs (Geldbeschaffungskosten), deductible in full as income-related expenses (Finanzverwaltung NRW) in the year you pay them (§ 11(2) EStG). The example's €1,200 is deducted in 2026 and stays out of the schedule.
• VAT you cannot reclaim stays in. Only VAT that can be deducted as input tax is excluded from acquisition cost (§ 9b(1) EStG). Residential letting is generally exempt from VAT (§ 4 no. 12 UStG), and exempt letting rules out input-tax deduction (§ 15(2) UStG). The €1,368 of VAT on the agent's invoice therefore remains part of the cost, as does the VAT on the notary's fee.
• Separately priced items come out. A share of the owners' association's maintenance reserve (Erhaltungsrücklage) bought with the flat is not part of the depreciation base, and a fitted kitchen is a separate asset depreciated over its own useful life (official Anlage V instructions).

Later spending is separate. Repairs are normally deductible when paid, but renovation within three years of purchase costing more than 15 per cent of the building's acquisition cost, excluding VAT, becomes part of the building's cost (§ 6(1) no. 1a EStG, applied to letting by § 9(5) EStG). See the 15 per cent rule.

For the example, the acquisition cost is €240,000 + €13,200 + €8,568 + €3,600 = €265,368.

Land does not wear out, so only the building is depreciated. The purchase costs are split in the same ratio as the price (Finanzverwaltung NRW).

The contract's split is the starting point, but the tax office can test it. The Federal Ministry of Finance's calculation aid divides a total price by the ratio of land and building values. It values them at the date of the purchase contract, not the handover date, and the ministry calls the result a qualified estimate that expert evidence can rebut (BMF guidance, 2026 edition). How to support the split is covered in our guide to the land and building split.

The completion date sets the rate. For residential buildings, straight-line AfA is 2.5 per cent a year for buildings completed before 1925, 2 per cent for those completed from 1 January 1925 to 31 December 2022, and 3 per cent for those completed after 2022, until the cost is fully deducted (§ 7(4) EStG). The example's 1996 building gives 2 per cent: €3,980.52 a year.

The acquisition date sets the start. The year of acquisition is the year of delivery (§ 9a EStDV). For an existing property, the tax administration starts depreciation when benefits and burdens pass to you, on the date in the notarised contract. The notarisation date and the land-register entry do not count (Finanzverwaltung NRW). For the example, that is 1 April 2026, not 15 January.

Other methods apply only where their conditions are met. Declining-balance AfA is limited to new residential buildings whose construction began, or whose purchase contract was signed, from 1 October 2023 to 30 September 2029, and a buyer must acquire by the end of the completion year (§ 7(5a) EStG); see linear or degressive AfA. Special depreciation for new rental housing has its own rules: see Sonder-AfA under § 7b. A shorter actual useful life can justify a higher rate, but only with property-specific evidence: see remaining-useful-life reports. None applies on the example's assumptions.

In the year of acquisition, the annual amount falls by one twelfth for each full month before the month of acquisition (§ 7(1) sentence 4 EStG). The tax administration applies this monthly split to buildings (Finanzverwaltung NRW). The month of acquisition itself counts in full, so a handover on 1 April or on 25 April both give nine months.

For the example: €3,980.52 × 9/12 = €2,985.39 in 2026.

Every year from 2027 to 2075 shows the same €3,980.52. Base €199,026 at 2 per cent; no change to the base assumed.

Because the first year is partial, 50 years of depreciation spread over 51 calendar years. The final €995.13 falls in 2076, and the building is then fully depreciated for this owner.

For 2026, the rental expenses therefore include €2,985.39 of AfA and the €1,200 of land-charge costs. At the assumed 42 per cent marginal rate, the AfA reduces income tax by about €1,254 and the land-charge costs by about €504. Neither amount arrives before the 2026 assessment, so in 2027 at the earliest. A full year's €3,980.52 is worth about €1,672 at the same rate. None of it changes the monthly loan payment or the rent.

• First claim. The official instructions ask for a separate explanation the first time you claim depreciation (Anlage V instructions). The schedule and the invoices behind it form that explanation.
• A fixed base. Recalculate only when something changes the base or rate, such as renovation costs that must be capitalised, and agree it with your tax adviser (Steuerberater).
• A sale. If you sell within ten years, the depreciation you claimed reduces your acquisition cost when the taxable gain is worked out (§ 23(3) sentence 4 EStG). Keep the schedule for as long as you own the apartment and beyond.

Our Anlage V guide shows where the annual figure goes on the return.

If you buy in Berlin, Dresden or Leipzig through Alpha Minoris's Buyer's Agent service, collecting the purchase documents is part of the purchase: the notarised contract, the invoices and the owners' association records arrive as one set that you can pass to your Steuerberater, and you need not live in the city. The depreciation calculation and the tax return stay with the Steuerberater.

If you are planning a purchase in Berlin, Dresden or Leipzig, start with the budget and the documents your depreciation schedule will need. Discuss your first rental property with Alpha Minoris.