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Tax & Depreciation Letting

Vacant Rental Property: Deducting Costs in Germany 2026

Last updated: 31 August 2026 · Reading time approx. 9 minutes

The tenant has moved out, the flat is empty — and the costs keep running: interest, property tax, service charges, depreciation. The good news: a vacancy does not end the deduction of letting expenses (Werbungskosten). The uncomfortable news: it very much does end it if you cannot prove your intention to let. What matters is not how long the flat stands empty, but what you can demonstrably show for that time.

Why an empty property still produces deductible expenses

For once the statutory wording helps straight away. Under § 9 Abs. 1 Satz 1 EStG, deductible expenses are „Aufwendungen zur Erwerbung, Sicherung und Erhaltung der Einnahmen" — expenses incurred to acquire, secure and maintain income — and under sentence 2 they are deducted against the category of income in which they arise. Rent actually received is not mentioned. What counts is the connection to the category of income, which for a property is income from letting and leasing under § 21 Abs. 1 Satz 1 Nr. 1 EStG.

That connection is not created by a tenancy agreement but by the intention to generate income (Einkünfteerzielungsabsicht). As long as you have visibly formed the decision to earn rental income from the property and have not finally abandoned it, the costs continue to be deductible — which usually means a vacancy year produces a loss from letting that is offset against your other income. That is exactly why the tax office looks harder at a property empty for years than at a let one.

These costs keep running during the vacancy

The table shows what typically arises in a vacancy year and what each deduction rests on.

ItemLegal basisWhat to watch
Building depreciation (AfA) § 7 Abs. 4 Satz 1 Nr. 2 EStG Runs on regardless of use: 3% where the building was completed after 31.12.2022, 2% where it was completed before 01.01.2023 and after 31.12.1924, and 2.5% where it was completed before 01.01.1925. Details in our guide to building depreciation.
Mortgage interest § 9 Abs. 1 Satz 3 Nr. 1 EStG Deductible are „Schuldzinsen […], soweit sie mit einer Einkunftsart in wirtschaftlichem Zusammenhang stehen" — interest economically connected to the income category. The repayment part of the instalment stays out; it is a shift of assets, not an expense.
Property tax, building insurance § 9 Abs. 1 Satz 3 Nr. 2 EStG Deductible are taxes on real property, other public charges and insurance premiums, to the extent they relate to buildings serving the taxpayer to generate income.
Service charges / owners' association fee § 9 Abs. 1 Satz 1 EStG With no tenant, there is nobody to recharge. The otherwise recoverable share becomes your own cost — economically the most painful side effect of a vacancy.
Refurbishment before re-letting § 9 Abs. 1 Satz 1, § 11 Abs. 2 Satz 1 EStG Maintenance expenditure is deducted in the year it is paid. For larger works, consider spreading it over two to five years.
Listings and letting agent fees § 9 Abs. 1 Satz 1 EStG Doubly valuable: immediately deductible — and the best available evidence of your intention to let. Keep the invoices and the adverts.

Which lines of the return the amounts belong in is covered by our guide to filling in Anlage V, the German rental income schedule. A vacancy changes nothing about its structure — only the income side stays empty.

Three vacancy situations — and what applies to each

The Federal Fiscal Court (Bundesfinanzhof, BFH) distinguishes by what came before the vacancy. The rule is the same in each case; the evidence is harder to produce in some.

  1. Vacancy after a previous, open-ended letting. The easiest case: the earlier tenancy already evidences the intention. Costs remain deductible as long as you have not finally abandoned the original decision.
  2. Vacancy before the first letting, i.e. after purchase or construction. There is no history to lean on: the intention must have been visibly formed — through listings, a letting mandate, a calculated asking rent. The deduction is granted as expenses incurred in advance.
  3. Vacancy after own use. Legally like case 2. Expenses that arise while you still occupy the property are never deductible — the dividing line is the day you form the intention to let in a way that is visible from outside.

What the tax office wants as proof

The most important sentence for landlords is not in the statute but in the case law: the taxpayer bears the burden of establishing that the letting efforts were serious and sustained. In plain terms — if it stays unclear whether you really tried, that counts against you, not against the tax office. So collect, continuously:

The most common mistake: advertising the sale alongside. Offering the flat for sale at the same time does not automatically cost you the deduction — the combination is permitted. But where the property is advertised exclusively as a sale object and the agent mandate is for a disposal, the BFH treats that as evidence that the intention to let has been abandoned (judgment of 11 December 2012 – IX R 9/12). If you want to keep both routes open, the letting route has to be as visible in the paperwork as the sale.

What a vacancy year is worth in tax terms

A worked example for a flat built in 1998, with €200,000 of the purchase price attributable to the building, twelve months vacant including refurbishment. All figures are arithmetic illustration, not empirical benchmarks.

ItemAmount for the year
Building depreciation (2% of €200,000)€4,000
Mortgage interest€5,400
Property tax€380
Owners' association fee (recoverable and non-recoverable)€2,760
Refurbishment before re-letting€6,500
Listings and marketing€240
Total deductible expenses€19,280
Tax effect at an assumed marginal rate of 42%approx. €8,098

The loss of €19,280 reduces your taxable income; at a personal marginal rate of 42%, roughly €8,098 comes back as a tax saving. The actual cash outflow remains considerably higher — tax carries part of a vacancy, not the vacancy itself. If you hold the property over several years, budget vacancy months as their own line in the calculation rather than as a rounding error.

When the deduction ends

The intention can fall away in two ways. The obvious one: you change your mind and sell or move in yourself. From that point the connection to § 21 EStG is gone and the running costs are a private matter.

The more awkward route is the silent one. A particularly long vacancy can extinguish the intention without any act or fault on your part — for instance where the flat cannot permanently be brought into a lettable condition because the owners' association will not resolve the necessary refurbishment. That you tried does not save the deduction: what matters is whether your efforts could have succeeded at all.

Practical consequence for your assessments. Tax offices frequently assess loss years from long-vacant properties provisionally or subject to review. That means even accepted years can be reopened later if the picture changes. A complete evidence file is therefore not red tape — it is the only defence that still works years afterwards.

The second lever: property tax relief

Alongside the income tax deduction there is a separate claim against the municipality where yield is lost. Under § 34 Abs. 1 GrStG, property tax on developed land is remitted by 25% where the normal gross yield is reduced by more than 50% and you are not responsible for that reduction; where the reduction is 100%, the remission is 50%. Under § 35 Abs. 2 GrStG the application must be filed by 31 March of the following year — a cut-off date that costs money every year simply because it is overlooked. The detail is in our article on property tax relief for lost rent and vacancy.

What the courts have decided

The statute says nothing about vacancies. Everything that decides the question in practice — how long the deduction survives, which efforts count, when it collapses — comes from three decisions of the 9th Senate of the Federal Fiscal Court (Bundesfinanzhof, BFH).

BFH, judgment of 11 December 2012 – IX R 14/12 (officially reported)

The leading decision. Expenses for a flat standing empty after a previous, open-ended letting remain deductible during the vacancy as long as the original decision to generate income has not been finally abandoned; the same applies, as expenses incurred in advance, to a flat standing empty after construction, purchase or own use, provided the intention was visibly formed and not later dropped. But the senate also holds that in an individual case a particularly long vacancy — even after a previous, open-ended letting — can cause an intention once formed to fall away without any act or fault on the taxpayer's part. And the burden of proof is yours: the taxpayer bears the burden of establishing that the letting efforts were serious and sustained. For owners that means: document while the vacancy is running, not once the assessment arrives.

BFH, judgment of 11 December 2012 – IX R 9/12 (not officially reported)

Decided the same day, on the "sell or let" question. As long as the owner is seriously and sustainedly seeking a tenant, a parallel sale offer does no harm. Conversely: where the agent mandate is for a disposal and the owner's own adverts market the flat exclusively as a sale object, that can be treated as evidence that the intention to generate income has been abandoned — even if letting efforts are made sporadically alongside. The decision is not published in the Bundessteuerblatt and therefore binds only the case decided; the tax administration does not apply it generally. It does show what an inspector looks for, and acting on it costs nothing: if you keep both routes open, name the letting expressly in the mandate and in the advert.

BFH, judgment of 31 January 2017 – IX R 17/16 (officially reported)

The limit of trying. A flat had stood empty since 1999 because the owners' association failed for years to get the necessary refurbishment done; the owner had paid the special levies and instructed first a managing agent and later an estate agent to let it. The BFH nevertheless upheld the refusal of the deduction: where a flat cannot, for factual or legal reasons, permanently be put into an operational condition and offered for letting, the tax court may find that the intention to generate income is absent. What tipped it was that the owner had neither the legal nor the practical power to make the flat lettable. Anyone stuck in a deadlocked owners' association should know this before declaring ten years of losses.

Frequently asked questions

How long may a flat stand empty before the deduction is lost?

There is no fixed period — neither in the statute nor in the case law. The BFH decides on an overall appraisal. The practical rule of thumb: the longer the vacancy, the more intensive and the more completely documented your efforts must be, and the more you are expected to change your approach (price, layout, target group, refurbishment).

Does depreciation keep running during a vacancy?

Yes. Depreciation under § 7 Abs. 4 EStG is measured by the acquisition or production cost and by the year, not by actual letting. It only stops if the connection to the income category falls away altogether — that is, with the intention to let.

May I use the flat myself while it is empty?

For the period of own use the deduction is lost. Occasional use as a second home or as storage is therefore expensive: it costs you not only the proportionate expenses but also supplies evidence against your intention to let as a whole.

What about refurbishment costs if the flat is never let after all?

They remain deductible if the intention to let existed when the expense was incurred and was only given up later. Conversely, refurbishment does not help retrospectively where the intention had already gone. The date of the decision therefore needs documenting just as much as the invoice.

Do I have to declare the vacancy in Anlage V?

The property goes into Anlage V like any other let property — with income of zero and the full deductible expenses. Attach the evidence of your letting efforts without being asked; it usually saves the follow-up query.

Vacancy costs and evidence in one place

RenoDiary brings interest, depreciation, service charges and trade invoices together per property and files the documents in a digital vault — so the evidence is still complete three years later.

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Sources

This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether the intention to generate income survives in a specific case is decided by an overall appraisal of all circumstances — the example figures are arithmetic illustrations, not empirical benchmarks.