2022-11-25 | Changes in the tax law on the residual lifetime of real estate in Germany
What is the true "residual life" of your property?
Change in the tax law for landlords on the “residual useful lifetime” of their investment properties in Germany
What is the remaining residual lifetime:
- 6 Abs. VI ImmoWertV:
The remaining residual lifetime is the number of years during which a building can probably still be used economically under proper management.
According to Section 7 (4) sentence 2 EStG, a building may be depreciated according to its actual residual lifetime. If the actual useful lifetime is less than the legally determined useful lifetime, the taxpayer must prove this.
For experienced owners who manage and lease professionally, it is clear: they now have the actual remaining true lifetime confirmed by a market real estate broker or a property appraiser. This expert opinion reflects the current market value of a property, i.e. the condition of the structural facilities, the location, equipment and current situation on the property market. A sales value is therefore determined that can currently be achieved for the property.
You can find information on the amendment here
The following sentence is important here:
„Here, the legislator implements a significant increase in property valuation, as the total useful lifetime is to be increased from 70 to 80 years (Annex 22 BewG-E). This also increases the respective remaining useful lifetime of a property and its value.“
As a private landlord, you should be alert.
Why are the professionals having the remaining residual lifetime of their properties confirmed by an surveyor and licensed real estate broker right now?
The tax office previously set the “remaining residual lifetime” of a property at a flat rate of 50 years, or 40 years for buildings constructed before 1925. At 50 years, that is 2 % per year that your house or flat loses value in accounting terms. So if the house cost €100,000, you can claim €2,000 per year as costs for tax purposes (depreciation).
Almost all properties have an actual remaining useful lifetime of far less than 50 years. Which heating system, façade, electrical system or roof lasts 50 years?
In order to claim a higher depreciation, you need proof of a shorter remaining useful lifetime in reality. As the owner, you must provide this proof of the shorter useful lifetime. If you submit a professional valuation on a remaining useful lifetime of, for example, 33 years instead of 50 years, the depreciation can be increased from 2 to 3 %. With a value of 100,000 €, you can therefore claim approx. 3,000 € per year as costs for tax purposes. The tax advantages and the liquidity gain can therefore be significant as higher the value of your property actually is.
Use the professional survery for tax advantages and liquidity gain.
Hint for property owners and landlords
The aim of the remaining useful lifetime appraisal is to determine the true useful lifetime. With our professional surveys, we calculate the remaining economic useful lifetime of your rented property and thus allow you a higher, tax-reducing depreciation. As a landlord, you save taxes and improve your cash flow.
Contact us via firstname.lastname@example.org or call us. CEO Andreas Müller is a Sprengnetter market value appraiser and is available to answer your questions on the subject.
The legislator will probably soon deprive property owners of the chance to change the actual useful lifetime of the property by surveys. That’s why the professionals are now taking action. You should do the same.
Energy-efficient refurbishment of buildings is very important in the face of dramatic climate change. Especially in older properties, energy efficiency improvements are often necessary. Tenants rightly expect future-proof living space. Targeted energy efficiency measures help to minimise energy consumption for heating, hot water and ventilation. As a landlord, you must therefore become active and renovate and refurbish.
Here is a highly simplified explanation of what this means for you in concrete terms:
You need to invest as an owner and landlord. If you modernise, you need money and adjusted depreciation. If you invest in – for example – a new heating system or a new roof within 3 years of purchase, it will be depreciated together with the purchase price over 50 years. If you invest after the 3 years, it will be depreciated much faster, depending on the kind of investment you have made. Especially in the current market situation, we all know that cash flow is important in order to have capital for the renovation and modernisation of your real estate.
With the implementation of the measures, the value and life span of your property will increase, even if the investment seems high at first.