Depreciation with a remaining useful life report: more liquidity through a higher AfA rate
This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.
The useful life of a property largely determines how the residential property is treated for tax purposes. Under German tax law, the legislator assumes a flat-rate economic useful life of 50 years for all properties from acquisition, which corresponds to annual depreciation of 2%. In this article, we explain how a remaining useful life report (Restnutzungsdauer-Gutachten) affects the amount of depreciation and the owner's tax situation. We also explain what the liquidity gained from higher depreciation means for financial provision in times of inflation and rising interest rates.
Neo Capital supports self-employed people and well-paid employees in the tax optimisation of their finances and investments. We advise our clients comprehensively on the effects of specific tax-reduction measures and explain how tax burden can be converted into private wealth. In this way, we develop a sustainable, data-based investment strategy for our clients' personal wealth building. Get advice on your individual situation and find out which tax options are still open to you in the current year.
The costs of a report as evidence of the remaining useful life
The remaining useful life report is an instrument for proving a shorter remaining economic useful life which, due to the age of a property, is below the flat-rate 50 years. If a building is already in a condition requiring renovation or modernisation, this can be put forward to the tax office (Finanzamt) to shorten the depreciation period. The evidence is a valuation report by a certified expert who confirms the assumption in writing. The aim of this evidence is to shorten the period of depreciation for wear and tear (AfA, Absetzung für Abnutzung) and thus to be able to deduct more than 2% of the purchase costs each year. The chances are particularly good if the property was built before 1990. However, the condition of the building does not necessarily have to correspond to its age. To obtain a decision recognising a shortened actual useful life, a report is required, which can be prepared separately. In many cases, this report allows the AfA rate to be raised to 2.5 to 3.5% per year. In total, this can mean an extra tax cashback of several hundred to a thousand euros per year. The costs of a remaining useful life report are therefore set against a sometimes enormous liquidity advantage, which can be used for direct investments in further properties or alternative investments.
Professional assessment in accordance with DIN EN ISO/IEC 17024
Remaining useful life reports are prepared by publicly appointed and sworn experts. This is intended to ensure that the assumption can be substantiated to the tax office in a comprehensible and credible way. We support our clients at all times in handling and communicating with experts and tax authorities in order to shorten the AfA period in line with the report. For this process, we commission experts throughout Germany who are certified in accordance with DIN EN ISO/IEC 17024, so that the remaining useful life determined is recognised without objection. Preparing valuation reports is a step towards optimised liquidity for new investments. The purpose of every remaining useful life report is to achieve a shorter depreciation period and thus to receive the full tax cashback more quickly. Following our forecast and advice, owners can demonstrate the need for a higher AfA rate independently of the tax office. The value of the property is not assessed, so owners need not worry about a certified lower market price. In principle, the remaining useful life report brings only advantages, as inflation will continue to erode deferred depreciation amounts over the long term. This makes the liquidity advantage an attractive lever for further investments.
Neo Capital: tax structuring through property
For well-paid employees and self-employed people, property is one of the most attractive investments for building tax-advantaged wealth over the long term. In the overall picture, a remaining useful life report can help to complete financial planning within a shorter time horizon and to work efficiently on building a portfolio. For this reason, we support our clients every day in having remaining useful life reports prepared on site by a publicly appointed and sworn expert. Together, we use the capital released for further investments and thus rapidly accelerate wealth building at a private level. If you are interested in converting tax burden into private wealth, our experts will advise you comprehensively on the possible measures. We look at your situation individually and make data-driven decisions for your investments and refunds. Arrange a no-obligation consultation for an initial assessment of your situation and your property. Together we will examine which measures are worthwhile and, in particular, whether the remaining useful life of a building can be shortened through our reports.