New depreciation rules will make the construction of rental properties more attractive
Depreciation (“AfA”) plays an important role in the decision pro or contra construction of rental housing. In order to make new construction of rental properties more attractive, the German Federal Government has adopted new provisions as part of the 2022 Annual Tax Act. The most important thing that future property owners or landlords should now know: Starting in January 2023, straight-line depreciation will no longer be two percent, but three percent per year.
Promote investments strategically
Linear depreciation, which is intended to make the construction of rental properties more attractive, will now be brought forward by half a year as a result of the Annual Tax Act 2022 (which still has to be passed by the Federal Council). The purpose of the new regulation is to provide a special incentive that could eliminate the shortage of rental properties through increased investment. Urgent housing construction and inflationary tendencies caused by the Russian war on Ukraine do not go well together. Therefore, both increasing the rate of straight-line depreciation and bringing the measure forward serve to stimulate the interest of potential builders.
In addition, the provisions surrounding straight-line depreciation will be supplemented by a temporary option for special depreciation: over a period of four years, five percent of the acquisition and construction costs for newly built rental apartments may now be deducted if they meet the Efficiency House 40 energy standard. The regulation, which applies from the beginning of 2023 to 2026, includes a cost cap of EUR 4,800 per square meter.
Tax benefits for new construction – criticism from experts
Experts criticize that the more attractive straight-line depreciation should also apply to existing properties and not only to rental properties. The fact that the benefits of the special depreciation are linked to high energy efficiency has also been criticized because this could deter potential builders and other investors.
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