RENODIARYRENOVATION MANAGER
DEEN Start for free
DE
Tax & Depreciation Buying & Valuation

Shorter Useful Life: Higher Building Depreciation 2026

Last reviewed: 18 September 2026 · Reading time approx. 8 minutes

An apartment block built in 1968 is written off over 50 years — even though nobody seriously expects it to still be standing in 2076. German law expressly allows the standard rate to be replaced by the building's actual useful life. Anyone who tries runs into a question that, on the search results pages, is answered almost exclusively by the firms selling the reports: what exactly does the evidence have to show? This article answers it from the statute and from the judgments of the Federal Fiscal Court (Bundesfinanzhof, BFH) — and covers one change that has drawn remarkably little attention.

What the law allows, and from what point

Building depreciation (Absetzung für Abnutzung, AfA) normally runs at fixed rates: 3% for buildings completed after 31 December 2022, 2% for the large stock between 1925 and 2022, and 2.5% for anything completed before 1 January 1925 (§ 7 (4) sentence 1 EStG). How those rates interact in detail is covered in our guide to German building depreciation.

Sentence 2 of the same provision opens a door: if the actual useful life is shorter, the depreciation matching it may be claimed instead. The provision sets thresholds that the shorter useful life has to undercut:

BuildingStandard rateShorter useful life applies below
Business assets, non-residential, permit applied for after 31 March 19853%33 years
Completed after 31 December 20223%33 years
Completed 1925 to 20222%50 years
Completed before 1 January 19252.5%40 years

What "useful life" means here is not defined in the EStG but in § 11c (1) EStDV: the period during which a building can foreseeably be used in line with its purpose. And for a purchased building that period starts on the date of acquisition, not in the year of construction. The previous owner has not already run the clock down; what counts is the condition you bought.

What the evidence has to show

This is the real point of dispute, and the Federal Fiscal Court has settled it in two steps. First, the method is open: the taxpayer may use any expert method that appears suitable in the individual case. A building-fabric report is not a precondition. Second — and this is what most offers gloss over — a bare reference to a model-based remaining useful life is not enough.

The distinction is finer than it sounds. Under the German valuation ordinance (Immobilienwertermittlungsverordnung, ImmoWertV) the remaining useful life is normally the difference between total useful life and the building's age, and individual circumstances such as modernisation carried out or maintenance left undone may extend or shorten it (§ 4 (3) ImmoWertV). That second half is the decisive one: the arithmetic on its own is a standardisation. Only a reasoned assessment of the specific building turns it into evidence. How remaining useful life feeds into valuation itself is covered in our piece on the income capitalisation approach.

The burden of proof sits entirely with the owner. Certainty, however, is not required: an estimate is to be rejected only where it clearly falls outside a reasonable range.

New and little noticed: the Federal Ministry of Finance circular of 22 February 2023, which had imposed additional requirements on this evidence, was withdrawn on 1 December 2025 — in agreement with the supreme tax authorities of the Länder, with no reasons given and no replacement. It followed the Federal Fiscal Court's judgment of 23 January 2024 (IX R 14/23), which had expressly departed in part from paragraph 24 of that circular. Many advice pages still present the circular's requirements as binding administrative practice. The benchmark since then is the statute and the case law.

What it is worth in figures

A worked example with round numbers. You buy an apartment block built in 1968; after the purchase price allocation between land and building, €400,000 is attributable to the building. A report arrives at an actual useful life of 25 years.

Standard rateShorter useful life
Depreciable building cost€400,000€400,000
Useful life50 years25 years
Rate2%4%
Depreciation per year€8,000€16,000
Additional deductible expenses p.a.—€8,000
Relief at an assumed 42% tax rate—€3,360

The effect is a shift, not an increase: in either case the cost base is written off exactly once, under § 7 (4) sentence 1 EStG "until fully written off". A shorter useful life pulls the deduction forward — which, over two decades, still makes it considerably more valuable. Whether the cost of a report pays for itself therefore turns mainly on how long you intend to hold the property.

Two traps

Declining-balance depreciation closes the door. Anyone choosing the declining-balance method for a newly built residential property under § 7 (5a) EStG — 5% of the residual book value each year, for projects begun after 30 September 2023 and before 1 October 2029 — should know that the Federal Fiscal Court has ruled out a later switch to depreciation based on actual useful life for the earlier declining-balance regime. For the new variant the statute itself permits a move to straight-line depreciation; whether that also opens the actual-useful-life route has not been decided by the court. For a new build this is therefore a decision made at the outset, not corrected halfway through.

A sudden event is something else. If the building loses value exceptionally — fire, water damage, a loss of tenancy that permanently destroys its economic use — that is not a case of shorter useful life but a deduction for extraordinary technical or economic depreciation. It is permitted under § 7 (1) sentence 7 EStG and expressly remains available alongside building depreciation (§ 7 (4) sentence 3 EStG).

What the courts have decided

The statute only says that a shorter useful life may be applied. How to prove it appears exclusively in the case law — and the Ninth Senate of the Federal Fiscal Court (Bundesfinanzhof, BFH) has marked out the decisive points in three judgments.

BFH, judgment of 23 January 2024 – IX R 14/23 (officially published)

The leading decision, and it cuts both ways. On one hand the owner may use "any expert method that appears suitable in the individual case for producing the required evidence" — expressly departing in part from paragraph 24 of the then-current ministry circular. On the other, a "bare reference" to the model-based remaining useful life derived under the valuation ordinance is not sufficient. In practice: a report that merely states a model calculation is open to attack; one that gives a reasoned assessment of the specific building's condition is not — regardless of which recognised procedure it uses.

BFH, judgment of 28 July 2021 – IX R 25/19 (not officially published)

The predecessor on which the leading decision builds: "Submitting a building-fabric report is not a precondition for recognising a shortened actual useful life." Where a tax office demands such a report, that is not a statutory requirement. Because the decision was not published in the Federal Tax Gazette it formally binds only the case decided — but its reasoning was taken up in IX R 14/23, which is officially published.

BFH, judgment of 29 May 2018 – IX R 33/16 (officially published)

"A switch from declining-balance depreciation already claimed under § 7 (5) EStG to depreciation based on actual useful life under § 7 (4) sentence 2 EStG is not possible." The decision concerns the earlier declining-balance regime for buildings; it has not been extended to the variant in § 7 (5a) EStG in force since 2023. Anyone opting for declining-balance depreciation should have examined the actual-useful-life route beforehand — not once the building has aged.

Frequently asked questions

How much is a shorter useful life actually worth?

That depends on the depreciable cost base and on your personal tax rate. In the example above, a useful life of 25 rather than 50 years doubles the annual deduction. The important part is that this is a timing effect: the total written off stays the same, only the timing moves.

Does the expert have to be publicly appointed and sworn?

Neither § 7 (4) sentence 2 EStG nor § 11c (1) EStDV prescribes how or by which method the useful life is to be estimated; the Federal Fiscal Court requires an expert method. The administrative instruction that set out further requirements was withdrawn on 1 December 2025. That does not make qualification irrelevant — it is simply not a statutory element, and in a dispute the tax court decides whether the estimate holds.

Is the valuation report I already have from the purchase enough?

Only if it contains more than the model calculation. The remaining useful life shown there may be used as an estimation method, but a bare reference to it is not sufficient (BFH, IX R 14/23). What decides the point in practice is whether the report gives reasons drawn from the property's individual circumstances — modernisation carried out, maintenance left undone, structural defects.

What happens at the end of the shortened useful life?

The cost base is exhausted. Section 7(4) sentence 1 EStG allows the amounts to be deducted "until fully written off"; there is no further depreciation on the same acquisition cost, even if the building is still standing and still let. Later production costs are unaffected, because they form a cost base of their own.

And if the building becomes unusable before then?

Then the issue is not useful life but the deduction for extraordinary technical or economic depreciation under § 7 (1) sentence 7 EStG. It presupposes a specific event and takes effect in the year it occurs, instead of spreading the deduction over years.

Depreciation, price allocation and invoices per property

RenoDiary keeps purchase price, building share, depreciation and contractor invoices together for each property — and prepares the figures for the German Anlage V.

Start for free

Sources

This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether a shorter useful life is recognised depends on the individual case; the figures are worked illustrations, not a promise of an outcome.