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Solar panels on rental property: the German tax rules for landlords

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

A photovoltaic system on a let building is one of the genuinely simple things in German tax law — as long as you know two limits. Break them and you do not lose the exemption in part, you lose it entirely. And the exemption has a flip side that most guides leave out. This article sets out both for landlords in Germany.

The exemption under § 3 no. 72 EStG

Since 2022, “income and withdrawals in connection with the operation of photovoltaic systems located on, at or in buildings (including ancillary buildings)” have been exempt from income tax — that is the wording of § 3 no. 72 EStG (Einkommensteuergesetz, the German Income Tax Act). The exemption is not limited to the feed-in tariff: the Federal Ministry of Finance expressly lists “payments for other electricity supplies, e.g. to tenants”, along with charges for EV charging and subsidies.

What counts is the installed gross capacity as recorded in the Marktstammdatenregister (Germany's master data register for energy installations) — not actual generation, not the number of panels. And the test runs in two steps, which the Ministry deliberately keeps apart.

StepWhat is testedLimit
1. Per buildingAll systems you operate on one building — ancillary buildings such as garages and carports belong to that building30 kWp per residential or commercial unit
2. Per taxpayerAll eligible systems you operate in total, across every building and every plot100 kWp per taxpayer or partnership

Two details that are easily missed in an existing portfolio: how many units a building has depends, per the Ministry, “as a rule on independent and self-contained usability” — not on the land register. And the operator of the system need not own the building. Ground-mounted systems, by contrast, are never eligible, whatever their size.

The cut-off date many guides skip

The uniform limit of 30 kWp per unit is new. It does not apply from a given tax year; it hangs on the date of the system. § 52 (4) EStG states that the current wording applies “for the first time to photovoltaic systems acquired, commissioned or extended after 31 December 2024”. For older systems the previous version continues to apply — and that one distinguished by building type:

BuildingSystem commissioned up to 31.12.2024System from 01.01.2025
Single-family house, commercial property with one unit30 kWp30 kWp
Two-family or apartment building15 kWp per residential unit30 kWp per residential unit
Mixed-use property15 kWp per residential/commercial unit30 kWp per residential/commercial unit

For an apartment building with six flats that means: a system commissioned in 2024 may not exceed 90 kWp, one built in 2025 may reach 180 kWp. Anyone extending an existing system moves into the new version — the statute names extension expressly alongside acquisition and commissioning.

Watch the garage. Ancillary buildings belong to the building, not to themselves. The Ministry gives exactly this case: two systems of 15.10 kWp each on a house with two residential units and its garage — 30.20 kWp together — exceeded the 30 kWp permitted for that building type under the old version, and both systems were therefore ineligible.

100 kWp is a cliff edge, not an allowance

This is where a growing portfolio gets dangerous. The Ministry makes it clear in paragraph 17: where a taxpayer operates systems totalling more than 100 kWp, the exemption is “not to be applied at all”. No pro-rata relief, no tapering — the exemption falls away for every system.

An example with three properties, all systems built from 2025 onwards:

  1. Apartment building, six flats, 45 kWp system — 180 kWp would be permitted per building. Fine.
  2. Apartment building, four flats, 40 kWp system — 120 kWp would be permitted. Fine.
  3. Single-family house, 20 kWp system — 30 kWp would be permitted. Fine.

Every single system passes step 1. Together, however, they come to 105 kWp — and that breaks the limit in step 2. The result: all three systems are taxable and a profit must be computed for each. The last 5 kWp cost the exemption on all 105. So when you plan the fourth roof, you do not price the fourth roof — you price the portfolio.

The flip side: no deduction for costs

Tax-free income means, as a mirror image, that the related costs are not deductible. § 3c (1) EStG puts it in general terms: expenses may “not be deducted as business expenses or income-related expenses to the extent that they are directly economically connected with tax-exempt income”. The Ministry applies this expressly to eligible photovoltaic systems.

In practice: no depreciation on the system, no maintenance or insurance costs, no financing interest for the system. If the running costs for insurance, maintenance and meter rental come to around 900 euros a year, those 900 euros reduce your taxable result by nothing. The exemption is therefore not a subsidy but a simplification — it pays off where the system runs a surplus, and it costs you where the early years run at a loss.

For your calculation: put the solar income into the property cash flow gross — with no tax deducted, but also with no tax relief on the cost side. Both effects fall away together, not just one of them.

VAT: the zero rate does not stop at 30 kWp

Here lies a widespread misconception. § 12 (3) UStG (Umsatzsteuergesetz, the German VAT Act) reduces VAT on the supply and installation of solar modules, essential components and storage to 0% where the system is installed “on or in the vicinity of private dwellings, homes, and public and other buildings”. The 30 kWp in the same provision is not a ceiling but a simplification: below it the conditions are “deemed” met without further examination.

The Ministry answers the question directly in its FAQ: are systems above 30 kWp covered — “Yes. Photovoltaic systems on or in the vicinity of residential buildings are always eligible. Systems with a capacity above 30 kW (peak) are therefore also eligible, e.g. on larger rental buildings.” Per the same FAQ, the rule is not time-limited. The 30 kWp income-tax limit and the VAT simplification threshold are two different things — they merely happen to sit on the same number.

If the same building also contains a commercial unit, it is worth looking at the VAT side as a whole: the VAT option for commercial letting can bring back the input VAT on converting and refurbishing that space as well — at the price of a ten-year commitment.

Trade tax and the “commercial infection”

§ 3 no. 32 GewStG (Gewerbesteuergesetz, the German Trade Tax Act) exempts standing trades from trade tax where their activity is confined exclusively to generating and marketing electricity from a solar installation attached to a building with an installed capacity of up to 30 kilowatts. That limit is per installation and was not raised alongside the income-tax one — it still stands at 30 kW, regardless of how many units the building has.

For co-ownership arrangements and asset-managing partnerships another rule matters more: under § 3 no. 72 sentence 3 EStG, § 15 (3) no. 1 EStG does not apply. The so-called commercial infection — where a single commercial activity turns all of a partnership's income into business income — is therefore no longer triggered by an eligible photovoltaic system. The rental income stays income from letting and leasing under § 21 EStG.

And the 15 % rule?

A roof-mounted system is, for income-tax purposes, “to be treated as an independent movable asset”, says the Ministry — so it is not part of the building. That is the starting point for drawing the line against acquisition-related production costs under § 6 (1) no. 1a EStG, which catches expenditure exceeding “15 per cent of the acquisition costs of the building”. How that three-year corridor works and what has to be counted into it is covered in the article on the 15 % rule for acquisition-related production costs. How a solar investment compares with a classic upgrade can be measured against the modernisation rent increase — there the investment lands in the rent, here in a separate, tax-free income stream.

Price the roof with the property, not beside it

In RenoDiary you record solar income as an additional revenue line on the property itself — it feeds into cash flow, yield and the deal traffic light instead of disappearing into a separate spreadsheet.

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What the courts have decided

The income-tax exemption under § 3 no. 72 EStG covers income tax only — whether selling the solar power to tenants carries the right to deduct input VAT is a separate, VAT question, and the Federal Fiscal Court (Bundesfinanzhof, BFH) has answered it.

BFH, judgment of 17 July 2024 – XI R 8/21

Where a landlord sells self-generated solar power to their tenants for payment, that is not an ancillary service to the VAT-exempt letting of residential space but a separate, VAT-liable supply of electricity — provided the tenants are free to choose their electricity provider and consumption is metered and billed individually. That is precisely what carries the input-VAT deduction on the purchase and installation of the system. For the landlord: a tenant-power model with real freedom of choice and its own meter secures the input VAT; electricity bundled flat into the service-charge statement does not.

Frequently asked questions

Do I still have to declare the solar income in my tax return?

Where the income from this activity is entirely tax-free under § 3 no. 72 sentence 1 EStG, sentence 2 of that provision means no profit has to be computed. A profit calculation for the system therefore falls away. Whether any entries are nonetheless required in an individual case is a question for your tax adviser.

Does a ground-mounted system count towards the 100 kWp?

No. Ground-mounted systems are not eligible at all under the Ministry's circular and are therefore also left out of the 100 kWp test. The same applies to a building-mounted system that already fails step 1.

What happens if I split a unit or extend the system mid-year?

Where the conditions are first or last met during the year, the exemption applies, per the Ministry, only up to or from that point in time. It is applied on a time-apportioned basis, not retroactively for the whole year.

Does this also apply if I sell the electricity to my tenants?

Yes. The Ministry expressly counts payments for electricity supplied to tenants among the tax-free income. The energy-law obligations of supplying electricity to third parties are unaffected.

Sources

This article offers general orientation for landlords in Germany and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Limits and cut-off dates can change — the statutory wording and advice from a qualified professional are what count.