Denkmal-AfA under § 7i EStG: 100% over twelve years
No other depreciation rule in German income tax law absorbs renovation costs as quickly as § 7i EStG: up to 9% a year for eight years, then up to 7% for four more – exactly 100% of the eligible costs. That is why Denkmal-AfA (the enhanced depreciation for listed buildings) tends to be the headline of every heritage property brochure. Read the statute, though, and the percentages turn out to be the easy part. The case is decided in three other places: the depreciation base, the certificate and the timing.
What § 7i EStG actually says
§ 7i(1) sentence 1 EStG allows a taxpayer, for a building located in Germany that qualifies as a Baudenkmal (a listed building under the law of the respective federal state), to deduct „in the year of production and in the following seven years up to 9 per cent each and in the following four years up to 7 per cent each of the production costs for construction measures“ that are „necessary in nature and scope to preserve the building as a listed building or to put it to sensible use“.
Three details in that wording carry the rest of this article:
- „up to“ – these are ceilings, not fixed annual amounts. Claim less and you carry a residual value beyond the twelfth year.
- „of the production costs for construction measures“ – the base is the renovation, not the purchase price.
- „necessary“ – and sensible use is only to be assumed, under sentence 2, where the building is used in such a way „that the preservation of the building's protected substance is guaranteed in the long term“.
The base is not the purchase price
For tax purposes a listed property splits into three parts, and only one of them falls under § 7i EStG:
| Component | Treatment | Reference |
|---|---|---|
| Land | Not subject to wear and tear, no depreciation. | – |
| Existing building substance (building share of the purchase price) | Straight-line building depreciation: 2.5% a year if completed before 1 January 1925, 2% if completed after that and before 2023, 3% if completed after 31 December 2022. | § 7(4) EStG |
| Certified construction measures on the listed building | Enhanced depreciation: up to 9% in the first eight years, up to 7% in the following four. | § 7i(1) EStG |
The split of the purchase price between land and building therefore determines the base of the ongoing depreciation – how to derive it defensibly is set out in Splitting the purchase price between land and building. The straight-line rates and their cut-off dates are broken down in Calculating building depreciation (AfA).
The worked example
A listed apartment building, completed in 1898, is bought for €400,000. Of that, €100,000 is attributable to the land and €300,000 to the existing building substance. The property is then renovated, and the heritage authority certifies €250,000 as necessary construction measures within the meaning of § 7i EStG.
| Year | Building AfA (2.5% of €300,000) | Denkmal-AfA under § 7i EStG | Total depreciation |
|---|---|---|---|
| 1 to 8 | €7,500 | €22,500 (9% of €250,000) | €30,000 |
| 9 to 12 | €7,500 | €17,500 (7% of €250,000) | €25,000 |
| from 13 | €7,500 | – | €7,500 |
The check adds up: €180,000 is written off across the first eight years and €70,000 across the following four – together the full €250,000. After twelve years the renovation is exhausted for tax purposes, while the existing substance keeps running for decades.
What that is worth depends on the personal tax rate. We use a marginal rate of 42% – the rate § 32a(1) EStG applies in the upper progression band. On that basis the Denkmal-AfA alone reduces tax by €9,450 in each of the first eight years and by €7,350 in each of the following four, €105,000 in total.
Three conditions that sink the deduction
1. The certificate
Under § 7i(2) EStG the taxpayer may claim the enhanced depreciation „only if he proves, by means of a certificate that is not manifestly unlawful, issued by the body competent under state law or designated by the state government“, both the listed status and the necessity of the expenditure. Without it there is no depreciation – the tax office may not substitute its own judgement. The issuing body is a state authority, so the procedure differs from one federal state to the next.
2. Coordination – before, not after
§ 7i(1) sentence 6 EStG requires the construction measures to „have been carried out in coordination with the body designated in subsection 2“. That means coordination while the work is happening, not handing over the invoices afterwards. Anyone who renews the roof first and informs the authority second has already failed the condition for that item – however faithful to the monument the result may be.
3. Public grants reduce the base
Under § 7i(1) sentence 7 EStG the enhanced depreciation is available only „to the extent that the production or acquisition costs are not covered by grants from public funds“. Subsidies and Denkmal-AfA cannot be stacked on the same euro; the certificate must state the amount of any grant and has to be amended if a grant is awarded later.
Buying from a developer: the cut-off date in the contract
Anyone acquiring an already-renovated heritage apartment falls under § 7i(1) sentence 5 EStG. It extends the enhanced depreciation to acquisition costs attributable to such measures – but expressly only „to the extent that these were carried out after the legally effective conclusion of a binding purchase contract or an equivalent legal act“. The decisive date is that of the notarised purchase contract: everything the developer built beforehand is not eligible under § 7i EStG for the buyer. Here the period covers the year the measure is completed plus the following eleven years.
§ 7i, § 7h, § 10f, § 11b – which rule for which case
| Provision | Case | Scope |
|---|---|---|
| § 7i EStG | Listed building used to generate income | Eight years at up to 9%, then four years at up to 7% of the production costs for the measures. |
| § 7h EStG | Building in a formally designated redevelopment area or urban development zone – listed status not required | Same rates and period; certificate issued by the municipal authority. Not applicable where the measures produce a new building. |
| § 10f EStG | Owner-occupied use | Deduction as special expenses: up to 9% in the year of completion and each of the following nine years. Only for one building; for jointly assessed spouses, two buildings in total. |
| § 11b EStG | Maintenance expenditure on a listed building | Spread evenly over two to five years – again only where coordinated with the body under § 7i(2) EStG and not covered by public grants. |
§ 11b EStG is why the line between production costs and maintenance expenditure counts twice on a listed property: one pot runs at 100% over twelve years, the other over a choice of two to five. How spreading maintenance expenditure works on ordinary residential buildings is covered in Spreading maintenance expenditure over five years.
What § 7i EStG does not do
- No combination with other enhanced depreciation. Where an asset meets the conditions of several relief provisions, enhanced or special depreciation may under § 7a(5) EStG be claimed „on the basis of only one of those provisions“.
- No shelter from the 15% trap. Repair and modernisation expenditure within three years of acquisition counts as production costs under § 6(1) EStG if, excluding VAT, it exceeds 15% of the acquisition costs of the building. On a listed property that threshold is breached almost inevitably – harmless as long as the costs go into the certificate anyway, but the end of any hope of an immediate deduction. Details in Acquisition-related production costs and the 15% threshold.
- No automatic residual value. If you do not use the maximum rates you are left with a residual value. Under § 7h(1) EStG, to which § 7i(1) sentence 8 EStG refers, it is added to the production or acquisition costs; depreciation then continues uniformly for the building as a whole.
What the courts have decided
How far the certificate's binding effect reaches is where owners and the tax office clash most often in practice – the Federal Fiscal Court (Bundesfinanzhof, BFH) has drawn the line.
BFH, judgment of 28 July 2021 – IX R 8/19
The heritage certificate's binding effect covers only the elements that § 7i(1) EStG itself names – whether the construction measures were necessary in nature and scope to preserve the building or put it to sensible use. How far it reaches in a given case depends on the actual wording of the certificate and, where needed, must be established by interpretation; where the heritage authority has expressly reserved individual cost items for the tax office's own review, the certificate has no binding effect on those items. For the owner that means: read the certificate itself closely – a lump-sum total with no breakdown by construction measure does not shield those items from an independent review by the tax office.
Frequently asked questions
Does Denkmal-AfA apply to a single condominium unit?
Yes. § 7i(3) EStG refers to § 7h(3) EStG, under which the provisions apply accordingly to parts of buildings that are independent immovable assets, to condominium units and to commercial part-ownership units.
Does the whole building have to be listed?
No. § 7i(1) sentence 4 EStG also covers buildings that are not listed in their own right but form part of a group of buildings or an overall complex protected as a unit – in that case, however, only for measures necessary to preserve the protected external appearance. A new heating system inside would not qualify.
Is § 7i EStG time-limited?
No. Unlike time-limited incentives, § 7i EStG contains no expiry date; the application provisions in § 52 EStG merely govern from when individual amendments apply. That does not remove the need to check the version in force in the year of the measure.
Record renovation costs so the certificate holds up
RenoDiary keeps trades, invoices and documents together per property and prepares depreciation and deductible expenses year by year for the Anlage V rental income schedule – the basis of every heritage claim.
Start for freeSources
- § 7i EStG (enhanced depreciation for listed buildings) — Gesetze im Internet (retrieved on 13 August 2026)
- § 7h EStG (buildings in redevelopment areas and urban development zones) — Gesetze im Internet (retrieved on 13 August 2026)
- § 10f EStG (owner-occupied listed buildings) — Gesetze im Internet (retrieved on 13 August 2026)
- § 11b EStG (maintenance expenditure on listed buildings) — Gesetze im Internet (retrieved on 13 August 2026)
- § 7 EStG (depreciation for wear and tear, subsection 4) — Gesetze im Internet (retrieved on 13 August 2026)
- § 7a EStG (common provisions, subsection 5) — Gesetze im Internet (retrieved on 13 August 2026)
- § 6 EStG (valuation, subsection 1 no. 1a) — Gesetze im Internet (retrieved on 13 August 2026)
- § 32a EStG (income tax tariff) — Gesetze im Internet (retrieved on 13 August 2026)
- BFH, judgment of 28 July 2021 – IX R 8/19 (binding effect of the heritage certificate) — Bundesfinanzhof (retrieved on 25 August 2026)
This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. What governs is the wording of the law as applicable at the time, the circumstances of the individual case and advice from a qualified professional.