How does depreciation (AfA) work for rental income?
June 25, 2023 | 40,00 EUR | answered by Tatiana Herrmann
Dear tax advisor,
My name is Guido Ratzberg and I have a question regarding depreciation for wear and tear (AfA) on rental income. I recently acquired a property and am now renting it out. I know that you can write off the acquisition costs of the property over its useful life, but I am unsure about the exact calculation and the tax implications.
Currently, I am unsure about how to calculate the AfA exactly and what tax benefits I can gain from it. I want to make sure that I take advantage of all opportunities for tax optimization and avoid making mistakes that could cost me dearly in the future.
Could you please explain in detail how depreciation for wear and tear works with rental income? What factors do I need to consider and how can I best optimize the AfA? Are there any special rules or considerations that I should be aware of?
I look forward to your expert advice and thank you in advance for your support.
Sincerely,
Guido Ratzberg
Dear Guido Ratzberg,
Thank you for your question regarding depreciation (AfA) for rental income. I am happy to help you correctly calculate the AfA and optimize it for tax purposes.
Depreciation (AfA) is a tax depreciation expense that is used to spread the acquisition or production costs of depreciable assets over their useful life. For rented properties, you can depreciate the acquisition costs of the building (excluding land) over its useful life. AfA is usually calculated linearly, meaning that the annual depreciation amount is evenly distributed over the useful life.
The usual useful life of buildings is 50 years. This means that you divide the acquisition cost of the building by 50 to calculate the annual AfA amount. For example, if the acquisition cost of your property is 300,000 €, then the annual AfA would be 6,000 € (300,000 € / 50 years).
However, it is important to consider that there are maximum limits that restrict the annual depreciation. These limits vary depending on the type of building and its use. For example, there is a linear AfA of 2% for residential buildings and 3% for commercial properties. There is also a declining balance method, where the depreciation is higher in the first year and decreases in the following years.
To optimize the AfA, you should carefully review all costs and depreciation possibilities. You may also be able to take advantage of special depreciation allowances, such as for historic preservation properties or energy-efficient upgrades. It is important to comply with all tax regulations and rules to avoid making errors that could result in additional payments later on.
I hope this information helps you. If you have any further questions or would like personalized advice, I am happy to assist you. Thank you for your trust, and I wish you success in renting out your property.
Best regards,
Tatiana Herrmann
