Taxes for Landlords: Depreciation, Interest, and Closing Costs
Taxes for landlords play a key role in determining whether an apartment is a sound investment—or just looks good on paper. It’s rarely about a single trick, but rather about depreciation, deductible business expenses, and the costs incurred at the time of purchase.
Sweet Home Berlin is not a substitute for tax advice. We organize the tax logic so that you can honestly compare properties and assumptions—before you sign the notarized contract.
Framework for Investors: Real Estate as an Investment in Berlin.
Depreciation: Depreciation on the Building
For rented residential properties, you can claim the acquisition or construction costs of the building (not the land) through depreciation. Section 7 of the Income Tax Act (EStG) applies.
For residential buildings, the current version of Section 7(4) EStG stipulates, among other things: If the building permit application was filed after December 31, 2022 (or the purchase occurred after completion under this timeframe), the straight-line depreciation rate is generally 3% per year. For older properties, the previous 2% rate often remains applicable. In addition, there are time-limited special and declining-balance rules for certain new rental apartments—which must always be assessed on a property- and time-specific basis.
In practice, this means: Depreciation reduces the taxable income base but does not replace positive cash flow. Sweet Home Berlin therefore first calculates rent and expenses—and then factors in depreciation as a second step.
Interest and Other Income-Related Expenses
Interest on debt used to finance a rental property is generally deductible as income-related expenses against rental income, provided the funds are actually used for the rental property. Maintenance expenses, non-recoupable management costs, and similar items may also be relevant—depending on the individual case and how they are distinguished from acquisition costs.
This is precisely why the financing structure is part of the investment review. For guidance: Real Estate Financing in Berlin and Equity for Home Purchase.
Real Estate Transfer Tax and Ancillary Purchase Costs
Even before the first rent increase, there is the real estate transfer tax. In Berlin, according to the Senate Department of Finance, the tax rate is 6% of the consideration for legal transactions effective January 1, 2014—see the State of Berlin’s FAQ on real estate transfer tax.
Together with notary fees, land registry fees, and, if applicable, real estate agent fees, this often results in approximately 10–12% in ancillary purchase costs. Details: Real Estate Transfer Tax in Berlin and Ancillary Purchase Costs in Berlin.
What Taxes Cannot Compensate for Landlords
Even a sound depreciation strategy cannot save a property with an excessive gap between the actual rent and the market rent, a renovation backlog, or a problematic homeowners’ association (WEG). Taxes for landlords are just one component—alongside location, the lease agreement, and capital expenditures. For rental properties, we therefore start by reviewing the lease agreement: buying a rented apartment in Berlin.
You can find current investment properties under “Buy an Apartment in Berlin.”
Frequently Asked Questions
What is the depreciation rate for residential buildings?
According to Section 7(4) of the German Income Tax Act (EStG), the straight-line depreciation rate for many residential buildings with a building permit application filed after December 31, 2022, is 3% per year. Older properties often follow a 2% rate. If in doubt, consult a tax advisor and check the property’s construction year.
Can I deduct mortgage interest?
When renting out a property, interest is generally deductible as income-related expenses, provided the loan is used for the rental property. No blanket guarantee without a case-by-case review.
How much is the real estate transfer tax in Berlin?
6% according to the State of Berlin (effective January 1, 2014). Source: Senate Department of Finance.
Is this tax advice from Sweet Home Berlin?
No. We explain the logic behind the purchase decision. Your tax advisor will handle the official tax planning.
Next Step with Sweet Home Berlin
If you want to consider taxes for landlords in relation to specific Berlin apartments, we’ll start with strategy, price, and the lease agreement—and then bring in your tax advisor for the detailed tax planning.