Not only the technical remaining useful life, but also the often shorter economic remaining useful life of real estate is to be recognized by the tax authorities. This was clarified by the Federal Fiscal Court in its ruling of 28.07.2021 (file number IX R 25/19). This means that the tax savings opportunities for landlords can increase enormously in the future.
Nicolas Salcedo, founder of the expert platform www.nutzungsdauer.com, is positive about the ruling. "Most private real estate investors did not have the shortened depreciation possibilities so far at all in their sights. The new ruling brings legal certainty and encourages taxpayers to inquire about the actual useful life of their property."
In principle, the building portion of rented real estate may be depreciated over 50 years, i.e. at 2 percent per year, according to Income Tax Act (EstG) Section 7 (4). Under certain conditions, the depreciation period can be shortened and the tax advantage extended. How this is done has been controversial to date. For example, the tax offices regularly limited this possibility by requiring detailed building substance appraisals, which were not only expensive but also difficult to obtain in practice.
Now, the ruling confirms that "in order to demonstrate the shortened actual useful life of a building used to generate income, the taxpayer may make use of any method of presentation that appears suitable in the individual case to provide the required evidence."