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Tax & Depreciation Letting

Nießbrauch and AfA: who depreciates the let property?

Updated: 13 September 2026 · approx. 9 min read

Under a German usufruct (Nießbrauch) ownership and income part company: one person is on the land register, another collects the rent. For gift tax the consequences are well charted — for ongoing income tax they tend to be settled only once the first assessment arrives. This article answers the three questions everything turns on: who is taxed on the rent, who may depreciate the building (AfA, the German building write-off), and which deductions vanish on transfer without anyone ever getting them back.

What a usufruct is under civil law

A usufruct encumbers the property so that the beneficiary is entitled "to draw the emoluments of the thing" (§ 1030 (1) BGB). For a let property that means the usufructuary becomes the landlord: they collect the rent, and they sign and terminate the leases. The owner stays on the land register and, for the duration, has no income from the property at all.

Three features shape the tax consequences:

Who is taxed on the rent

Income from letting and leasing is earned by whoever satisfies the statutory test — that is, whoever lets the property in their own name and for their own account (§ 21 (1) sentence 1 no. 1 EStG). Where a usufruct has been validly created, that is the usufructuary. They declare the rent in their Anlage V (the German rental-income schedule), and the owner declares nothing at all for that property.

This assumes the landlord position has genuinely passed to them. A usufruct that exists only on paper, while the owner keeps deciding everything and the rent lands in the owner's account, shifts no income. Among close relatives, that is the first thing the tax office examines.

The AfA question: reservation beats grant

Here the two structures diverge, and the difference is the economically most significant point of the whole topic. Depreciation is measured by the "acquisition or production costs" (§ 7 (1) sentence 1 EStG) and is deductible as an income-related expense (§ 9 (1) sentence 3 no. 7 EStG). So the person who may depreciate is the one who bore those costs and earns income from the property. Both have to coincide.

 Reserved usufruct (Vorbehaltsnießbrauch)Granted usufruct (Zuwendungsnießbrauch)
Mechanics The previous owner transfers the property and reserves the usufruct. The owner stays owner and grants a third party the usufruct.
Rental income with the usufructuary (the former owner) with the usufructuary
Building depreciation with the usufructuary — they bore the acquisition costs and continue to use the property under a right of their own with nobody, as long as the usufruct is granted for free: the usufructuary has no acquisition costs, the owner has no rental income
Running costs deductible by whoever bears them and earns income from them — in both cases, as a rule, the usufructuary
Mortgage interest deductible by whoever services the loan and declares the rent (§ 1047 BGB allocates the interest to the usufructuary)

The Federal Fiscal Court (Bundesfinanzhof, BFH) draws the line unambiguously in its judgment on the extended reserved usufruct (IX R 1/21): a reserved usufructuary is entitled to depreciation "to the same extent as previously as owner", because they use the property "without interruption under a right of their own". By contrast, someone who uses a building "on the basis of a usufruct granted to them without consideration is not entitled to depreciation where it was not they but the owner who bore the acquisition or production costs".

The mistake that costs money: § 11d (1) sentence 1 EStDV lets an acquirer without consideration continue the predecessor's depreciation — but only for "assets which the taxpayer has acquired without consideration". Under a granted usufruct the beneficiary acquires no asset, only a right of use in someone else's. The provision therefore does not help them. It does help the owner who receives the property as a gift subject to a reserved usufruct: they later continue their predecessor's write-off — but only once the usufruct ends and they let the property themselves.

Worked example: what a granted usufruct costs

A let flat acquired in 2016 for €300,000, built in 1978, of which €240,000 is the building. Straight-line depreciation is 2% (§ 7 (4) sentence 1 no. 2(b) EStG), that is €4,800 a year.

The figure is an illustration of the arithmetic, not a target — but the order of magnitude explains why the sequence "transfer first, then reserve the usufruct" is almost always the cheaper one in practice. How the usufruct affects gift tax in parallel is set out in the article on gifting a let property; the rates and bases of the write-off itself are collected under calculating building depreciation.

Maintenance expenditure: the spread does not end on death, it lapses

Major maintenance expenditure on buildings used predominantly for residential purposes may be "spread evenly over two to five years" (§ 82b (1) sentence 1 EStDV). A usufructuary who has a roof renewed for €200,000 will therefore typically spread the deduction over five years — counting on the remaining instalments arriving in the following years.

§ 82b (2) EStDV lists when the remainder is deducted early: on disposal, on transfer into business assets, and where the building "is no longer used to generate income". The death of the usufructuary is not on that list — and that is exactly what case IX R 22/17 foundered on (see below). The heir and new landlord was not allowed to deduct the remainder; the volume was lost to everybody.

Practical conclusion: the older the usufructuary, the less a five-year spread can bear. Where the beneficiary is elderly, deducting in full in the year of payment is the more robust choice, even if the spread looks smoother on paper. The mechanics of the spread itself are described in the article on spreading maintenance expenditure under § 82b EStDV.

When the usufruct ends

When the usufruct ends the landlord position returns to the owner — and not to an empty flat. Where the usufructuary "has let or leased a plot of land beyond the duration of the usufruct", § 1056 (1) BGB applies the rules on the sale of let residential space by analogy: the owner steps into the running leases. They can terminate only "observing the statutory notice period" (§ 1056 (2) BGB) and only on a ground German tenancy law recognises.

For tax purposes their own letting begins at that point: they declare the rent and deduct the depreciation to which they are entitled — where they acquired without consideration, the continued write-off of their predecessor under § 11d (1) sentence 1 EStDV, which was running anyway. What went undeducted during the usufruct is not made up later.

Usufruct among close relatives: what the tax office checks

A usufruct granted to children for free shifts rental income to people with a personal tax-free allowance of their own. That this has a tax effect does not make the structure impermissible — § 42 (2) AO requires an "inappropriate legal structure" producing a "tax advantage not provided for by law". In 2023 the IX. Senate made clear that shifting the source of income is not, on its own, enough.

What actually defeats these arrangements is something else: the usufruct has to be validly created under civil law, entered in the land register and genuinely lived out. Where minors are involved that includes a supplementary guardian, whose approval fixes the date on which the arrangement takes effect. And the rent has to reach the usufructuary's account — not the parents'.

What the courts have decided

The statute says who may deduct depreciation only indirectly, through the acquisition costs. How that condition reads in a usufruct case has been worked out by the IX. Senate of the Federal Court of Finance (Bundesfinanzhof, BFH) in three decisions that between them cover the practice.

BFH, judgment of 24 May 2022 – IX R 1/21 (officially reported)

Parents had transferred their house to their children subject to a reserved usufruct, later sold it, and used the proceeds to buy replacement properties for the children over which a usufruct was again created in their favour. The Senate held that the reserved usufruct continues in the replacement property where the usufructuary economically bears its costs ("extended reserved usufruct"). The flip side: that leaves building depreciation under § 7 (4) EStG in place. The claimants instead wanted to write off a right of use, said to have been acquired for consideration, over their statistical life expectancy of 20 years, and to include the land in the base — the Senate rejected both. For owners: swapping the property saves the usufruct, but it does not create a new, larger write-off.

BFH, judgment of 13 March 2018 – IX R 22/17 (not officially reported — binding for the case decided)

As reserved usufructuary the mother had incurred €217,503 of maintenance expenditure and spread it over five years under § 82b EStDV. She died in the second year. Her son, the owner and sole heir, continued letting and sought to deduct the remainder. The Senate refused: the owner "cannot deduct the remaining part of the maintenance expenditure as income-related expenses". The decision is not officially reported and formally binds only that case — but the reasoning follows directly from the wording of § 82b (2) EStDV, which does not list the death of the usufructuary as a triggering event. Anyone financing a major refurbishment inside a usufruct should therefore choose the spread deliberately.

BFH, judgment of 20 June 2023 – IX R 8/22 (not officially reported — binding for the case decided)

Parents granted their children, aged 14 and 10, a time-limited usufruct without consideration over a let commercial property. The tax office continued to attribute the income to the parents; the tax court saw an abuse of legal structuring. The Senate set that aside: the time-limited transfer of the source of income without consideration "is not abusive where, apart from the shifting of the source of income, no further tax advantage accrues to the grantor". The case was nevertheless referred back — what remained open was whether the usufruct had actually been carried out. That, and not § 42 AO, is where the hurdle lies.

Frequently asked questions

Can the usufructuary spread the write-off over their life expectancy?

No, not where they depreciate the building as a reserved usufructuary: then the rates in § 7 (4) EStG apply, that is 2%, 2.5% or 3% depending on the year of completion. The attempt to write off a right of use over statistical life expectancy instead failed in IX R 1/21.

Does the land count towards the depreciation base?

No. Only the building share is written off (§ 7 (4) sentence 1 EStG). In IX R 1/21, 44.31% of the purchase price was attributable to the land and dropped out of the base.

Who deducts the mortgage interest where the property is still financed?

Whoever bears the interest and earns rental income from it — under § 1047 BGB that is normally the usufructuary, to the extent the charge was already registered when the usufruct was created. Income-related expenses are expenses "incurred to acquire, secure and maintain income" (§ 9 (1) sentence 1 EStG); without income of your own from the property they go nowhere.

Does the usufruct have to be entered in the land register?

For a usufruct in rem, yes. The BFH does treat a purely contractual right of use as "equivalent to a usufruct in rem for tax purposes to that extent" (IX R 1/21, third headnote), but that concerns attribution in the context decided and does not replace the registration that secures the usufruct against third parties.

What happens to running leases when the usufruct ends?

The owner steps into them (§ 1056 (1) BGB together with the rules on the sale of let residential space) and can terminate only on the statutory notice period and on a recognised ground (§ 1056 (2) BGB).

Depreciation, maintenance and Anlage V, property by property

RenoDiary brings the purchase-price split, the write-off, tradespeople's invoices and rental income together per property — and shows which amounts land in which year's Anlage V.

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Sources

This article provides general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether a usufruct arrangement is recognised depends on how it is drafted and actually carried out in the individual case; the example figures are illustrations of the arithmetic.