Introduction to tax depreciation and its significance
Depreciation plays a central role in tax law. They not only serve to distribute acquisition and production costs over the life of an asset, but are also an important means for the state to create investment incentives. Through depreciation, taxpayers can reduce their taxable income, which leads to liquidity advantages. However, tax practice shows that not every legal change actually achieves this benefit. Taxpayers are often faced with uncertainties and questions as to whether they can benefit from certain concessions at all. Currently, the new Growth Opportunities Act (BGBl. I 2024, No. 108) in conjunction with Section 7b EStG raises precisely these questions.
Challenges in the implementation of tax benefits
The legislator’s aim of creating tax incentives to promote investment can be jeopardized by complicated regulations and uncertain implementation conditions. Taxpayers who rely on these benefits may be confronted with obstacles that reduce the actual benefit of the measures. One example of this is the new Growth Opportunities Act, which includes significant changes to the depreciation of real estate.
Tax incentives as part of the Growth Opportunities Act
Among other things, the Growth Opportunities Act established new depreciation rules for real estate.propertiest. These include declining balance depreciation in accordance with § 7 para. 5a EStG for residentialreal estate, which are depreciated at a rate of 5 % of the acquisition or production cost.costs is made possible. This regulation can be used retroactively from 2023 . In addition, the special depreciation for new rental apartment buildings according to § 7b EStG with new, higher amounts reactivated. The Regulation enables a straight-line depreciation of 5 % in the first four yearsn after completion.
Combination of depreciation to maximize benefits
The Growth Opportunities Act allows taxpayers who Combine special depreciation in accordance with § 7b EStG with declining balance depreciation in accordance with § 7 para. 5a EStG . This option can be particularly advantageous for investors, since the annual amortization amounts to up to 10 % can increase. However, it is important that certain deadlines and conditions are met. So the building application or building notification and the start of construction by no later thanSeptember 30, 2029 at the latestin order to benefit from the full tax incentive.
Do you have any questions on this topic?
Important differences between purchase and production
A central difference exists also between acquisition and production transactions from Real estate. In the In the event of acquisition, the property must still be acquired in the year of completion in order to full Ato be able to take advantage of these opportunities. Only then is the property considered “new” and therefore eligible within the meaning of the law. In the event of manufacture comes it on the other hand on the timelyn Building application or dhe Building notification to.
Conclusion: Tax planning requires foresight and care
The new tax regulations pose considerable challenges for taxpayers. With the Growth Opportunities Act and the revival of special depreciation under Section 7b of the German Income Tax Act (EStG), legislators have created attractive opportunities to maximize the depreciation amounts for construction projects. However, the practical implementation requires
Our recommendation
For investors in the real estate sector in particular, it is advisable to work closely with tax advisors to ensure that all requirements are met and that potential tax benefits are optimal be exploited to the full. The tax environment is complex and subject to frequent changes, which is why it is important to keep abreast of the latest developments. If you have any questions, please contact us at any time.
The author: Axel Bunselmeier
I have been advising national and international clients on their tax matters for almost 12 years, with a clear focus on private clients, high net worth individuals, real estate investors, athletes and start-ups.
I gained my experience at Grant Thornton, where I focused on family companies and asset transfers, at Trinavis, where I advised real estate investors, and at Deloitte, where I specialized in international expat management and double taxation treaties.
