Tax depreciation 2026: 5% degressive AfA under §7(5a) EStG until 30 Sep 2029 plus 5% §7b EStG special write‑off—what foreign landlords can and cannot combine

What changed and the dates you must hit

Two federal measures apply to new rental housing as of 2026 and can, in many cases, be used together.

First, §7(5a) EStG re‑introduced a degressive building depreciation for residential buildings at a flat 5% of the book value each year. It applies if construction began after 30 September 2023 and before 1 October 2029, or if the acquisition is based on a purchase contract concluded in that same window and the unit is acquired by the end of the year of completion. The 5% rate runs until you choose to switch to linear depreciation; switching from degressive to linear is allowed, the reverse is not. The rule covers buildings in the EU or EEA, provided they serve residential purposes. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__7.html))

Second, §7b EStG provides additional special depreciation of up to 5% per year for four years (maximum 20%) on new rental apartments. It applies to apartments created under a building permit or notification filed after 31 December 2022 and before 1 October 2029. These apartments must be in a building that meets “Effizienzhaus 40” with sustainability class and is evidenced by the QNG (Qualitätssiegel Nachhaltiges Gebäude). ([dejure.org](https://dejure.org/gesetze/EStG/7b.html))

Today’s date is 20 September 2026. Both regimes are in force, and the current end‑date for entering projects is 30 September 2029. The Federal Ministry of Finance (BMF) clarified details, examples and interactions in a letter dated 21 May 2025. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__7.html))'}},{

5% degressive AfA under §7(5a) EStG—scope, rate and switching

Eligible assets are residential buildings (including apartments) located in the EU/EEA that you construct yourself within the time window or that you acquire on the basis of a purchase contract signed from 1 October 2023 to 30 September 2029, provided you buy by 31 December of the year the building is completed. The depreciation rate is a fixed 5% of the book value each year. If you later switch to linear depreciation, the remaining depreciation is computed on the then‑remaining book value over the remaining useful life; switching back to degressive is not allowed. During degressive AfA you cannot claim an additional special extraordinary write‑off (AfaA). ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__7.html))

The law does not cap the §7(5a) base. It applies to the full acquisition or production cost allocated to the building. The rule is separate from §7b; you may claim §7(5a) even if you do not meet §7b energy or cost conditions. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__7.html))

5% §7b EStG special depreciation—caps, EH40/QNG and rental duty

§7b can be taken in the year of acquisition or completion and the following three years, up to 5% per year of the eligible base per apartment (not per building). The measure requires that apartments are created under a building permit or notification filed after 31 December 2022 and before 1 October 2029 and are in a building meeting “Effizienzhaus 40” with sustainability class, evidenced by a QNG certificate. The apartment must be rented for consideration in the year of acquisition or completion and the following nine years; short‑term accommodation does not qualify as residential use. ([dejure.org](https://dejure.org/gesetze/EStG/7b.html))

Costs are constrained twice. First, the “Baukostenobergrenze” is 5,200 euros per m² of living area for permits/notifications in the 2023–2029 window; exceeding it excludes §7b entirely. Second, the deductible base for the §7b calculation is further capped at 4,000 euros per m² even when actual costs are higher. The BMF application letter of 21 May 2025 sets out how to measure living area and how to apply those caps in examples. ([dejure.org](https://dejure.org/gesetze/EStG/7b.html))

State‑aid compliance under EU Regulation 2023/2831 (de‑minimis) is required only if you claim §7b within a business, professional or agricultural income (EStG §§13, 15, 18); it is not required for private rental income (§21). This is reflected in the statute and in the BMF checklist used by tax offices. ([dejure.org](https://dejure.org/gesetze/EStG/7b.html))

Can you combine §7(5a) and §7b? Yes—here is how it works

The BMF confirms that the §7b special depreciation can be claimed in addition to either linear AfA under §7(4) or degressive AfA under §7(5a). In practice, you compute the degressive AfA on the full building cost while §7b is computed per apartment on its eligible base (capped at 4,000 euros/m²). After four years, the remaining building book value (after both AfA streams) continues to be depreciated—if you stay degressive, by 5% of the residual book value; if you switch to linear, by the linear rate over the remaining life. ([bundesfinanzministerium.de](https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Einkommensteuer/2025-05-21-anwendungsschreiben-7b-estg-neu.pdf?__blob=publicationFile&v=5))

The official example shows a building with 1,000,000 euros of eligible costs combining 5% §7b and 5% degressive §7(5a): the cumulative write‑off after four years is 385,494 euros and the residual book value for year five is 614,506 euros. This is a mechanical outcome of applying both streams in parallel and then continuing from the residual value. ([bundesfinanzministerium.de](https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Einkommensteuer/2025-05-21-anwendungsschreiben-7b-estg-neu.pdf?__blob=publicationFile&v=5))

What you cannot combine or do

You cannot cumulate §7b with the increased depreciation under §§7h or 7i EStG (redevelopment areas or listed buildings) for the same measures; §7a(5) EStG imposes a cumulation ban. If both would apply, you must choose one for the relevant works. Linear or degressive AfA must still be taken alongside §7b. ([bundesfinanzministerium.de](https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Einkommensteuer/2025-05-21-anwendungsschreiben-7b-estg-neu.pdf?__blob=publicationFile&v=5))

If the apartment is not used for residential letting in the acquisition/completion year and the following nine years, if it is sold within that period with a gain that is not subject to German income or corporation tax, or if the 5,200 euros/m² cost ceiling is breached within three calendar years after the year of acquisition/completion due to subsequent costs, all §7b write‑offs taken must be reversed with interest. Short‑term guest accommodation does not count as residential letting. ([dejure.org](https://dejure.org/gesetze/EStG/7b.html))

While using degressive §7(5a), you cannot take extraordinary depreciation (AfaA), and you can only switch one‑way—from degressive to linear. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__7.html))

Non‑resident owners: eligibility, returns and common traps

Depreciation rules apply regardless of your residence. If you earn German‑source rental income, you are subject to limited tax liability on that income under §49 EStG and may deduct rental expenses, including AfA and special write‑offs, when filing a German return. ELSTER guidance confirms that building acquisition or production costs are deductible through AfA (including special allowances where the statutory tests are met). Consider appointing a local tax adviser to manage filings and evidence (QNG, area calculations, cost breakdowns). ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__49.html?utm_source=openai))

Two traps matter for cross‑border investors. First, ensure the timing evidence fits the statute: for §7(5a), either show the recorded start‑of‑works date (Baubeginnsanzeige) after 30 September 2023 or—if you are buying—show a binding purchase contract dated between 1 October 2023 and 30 September 2029, and ensure acquisition by the end of the completion year. For §7b, the decisive date is the permit/notification filing between 1 January 2023 and 30 September 2029, not the start of physical works. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/estg/__7.html))

Second, document the EH40/QNG compliance and the two cost limits for §7b from the outset. If subsequent capitalised costs push the apartment’s average per‑m² cost above 5,200 euros within three calendar years after the year of acquisition/completion, prior §7b deductions are clawed back with interest. Keep separate files per apartment because §7b is apartment‑based, while §7(5a) is computed on the building’s book value. Do not rely on this article for personalised advice; ask a Steuerberater experienced in cross‑border filings. ([dejure.org](https://dejure.org/gesetze/EStG/7b.html))