AfA (Absetzung für Abnutzung)
Depreciation - How the German tax system lets you write off property value
AfA (Absetzung für Abnutzung) is the German term for depreciation on investment properties. It's one of the most powerful tax benefits available to real estate investors in Germany.
How It Works
When you buy an investment property in Germany, the tax office allows you to "write off" the building portion of your purchase over time. The logic: buildings wear out, so you should be able to deduct that wear and tear from your taxable income.
For residential rental properties, the standard rate is 2% per year for 50 years. This means if your building is worth €400,000, you can deduct €8,000 per year from your taxable income.
Real Example
Property Purchase Breakdown:
- Total purchase price: €500,000
- Land value (not depreciable): €100,000 (20%)
- Building value (depreciable): €400,000 (80%)
Annual Tax Benefit:
- Annual AfA deduction: €400,000 × 2% = €8,000
- Your marginal tax rate: 42%
- Annual tax savings: €8,000 × 0.42 = €3,360
Key Points to Remember
- Only the building value counts: Land doesn't depreciate, so you can only deduct the building portion
- It's automatic: You claim AfA every year you own the property
- The higher your income, the more you save: If you're in a 42% tax bracket, every €1 of AfA saves you €0.42 in taxes
- It reduces taxable income, not property value: AfA is a tax calculation only—your property can still appreciate in real value
Common Misconception
"Depreciation means my property is losing value"
False! AfA is purely a tax concept. While you're "depreciating" €8,000/year on paper for tax purposes, your property might actually be appreciating €15,000/year in real market value. These are completely separate concepts.
Related Terms
Sonder-AfA(Sonder Absetzung für Abnutzung)
Sonder-AfA is an enhanced depreciation benefit for newly built properties. It allows you to deduct 5% annually for the first 4 years, in addition to the standard 2% AfA.
Tax Savings(Steuerersparnis)
Tax savings from real estate come from deducting property expenses (interest, depreciation, costs) from your taxable income, reducing the amount of income tax you pay.
Building Value(Gebäudewert)
Building value (Gebäudewert) is the portion of the property purchase price allocated to the structure itself, excluding land. Only the building value can be depreciated with AfA.