With the Federal Council resolution of 28.06.2019, the Federal Council of Germany cleared the way for tax incentives for new rental housing constructions. The new regulations for special depreciation are regulated in § 7b EStG (German Income Tax Act) and are intended to facilitate the creation of new apartments in the middle and lower price segments.

The special depreciation amounts to up to 5% annually over a total period of 4 years in addition to the annual depreciation of 2%. However, the assessment basis of the 5% special depreciation is limited to 2,000.00 euros per square metre.

The last time it can be claimed is in 2026. In order to fully benefit from the special depreciation, the construction project must be completed no later than 2023.

The utilisation of the special depreciation allowance is subject to strict conditions, including:

  • creation of new residential space on the basis of a building application submitted after 31 August 2018 and before 1 January 2022
  • The acquisition or production costs may not exceed 3,000.00 euros per square metre
  • The dwelling must be used for residential purposes in the year of the acquisition and for the following nine years.
  • Compliance with the State aid rules of the De-minimis Regulation

The special depreciation, in addition to liquidity advantages, is particularly charming in the case of a tax-free sale from private assets after 10 years, since an additional 20% depreciation would have already been claimed. However, the resulting higher capital gain is not taxable and therefore stays with you.

In addition to these advantages, special attention must be paid to the risk of triggering one of the harmful processes codified in the law. This includes, among other things, the no longer remunerated transfer of property for residential purposes. Such a harmful transaction triggers a retroactive event and has the consequence that the special depreciation is reversed for all years, plus interest on tax arrears, if applicable. In the case of acquisition, you should also note that a „new“ apartment is only considered to be a „new“ apartment if the legally effective acquisition has been made by the end of the year of completion.


In particular, the capping of the acquisition or production costs at 3,000.00 Euro/sq. m. is likely to make it difficult to take advantage of this option, especially in metropolitan areas. However, provided that the above-mentioned conditions can be met and the acquisition or production is planned, the transaction should be carried out with foresight to the subsidies. Due to the narrow conditions, careful planning of such a project is essential.