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Monument protection AfA

Save taxes with listed properties

Listed buildings are a worthwhile investment. Not only does society retain a building that is worthy of protection, tax-saving opportunities increase returns for investors who rent out the property. The state promotes the preservation of old buildings with tax depreciation. Investors should therefore know the possibilities and requirements of a tax depreciation of listed properties.

What does depreciation mean?

Depreciation is short for depreciation for wear and tear. As a building gradually loses its value, it can linear continuously written off over the tax return. A distinction must be made between so-called old and new buildings. All properties that were built before 1925 are considered old buildings. These are to be written off within 40 years, i.e. at 2.5% of the acquisition costs annually. Younger buildings are to be depreciated linearly at 2% over a total of 50 years. This applies to all rented properties. The deductions only concern the pure acquisition costs for the property, renovation and refurbishment expenses are not included. However, because monument owners have to cope with very high repair and modernization costs, the state rewards them with additional tax advantages.

What are the additional tax advantages for listed properties?

In the tax regulations, a distinction must be made between owner-occupiers and investors. Investors can fully invest in the renovation Income tax return claim, while owner-occupiers of listed properties are only allowed to deduct 90% of the renovation costs. As a capital investor, you can take advantage of the more attractive tax advantages. Anyone who purchases a house that is under monument protection can write off 9% of the modernization and renovation costs in the first eight years after purchase and seven percent in each of the following four years. After 12 years, the entire restoration costs for the monument are thus written off for tax purposes. This applies to all projects that were started after December 31, 2003. However, it is precisely defined which of the costs may be deducted. They must clearly serve to preserve the monument. This includes roof and facade renovations or the installation of new wooden ceilings, but also the renovation of bathrooms and toilets. Expenses for the construction of new parts of the building or of new outdoor facilities and garages as well as the interior fittings are not included in the deductible costs. A special case are the expenses that are incurred within three years of the purchase of a listed property. If these costs exceed 15% of the purchase price, they are added to the straight-line depreciation cost.

An example is intended to illustrate the tax deductibility of restoration and restoration costs: An investor acquired an old factory in the Hamburg district of Bahrenfeld. He would like to set up and rent a noble loft with 4 rooms there. The total purchase price was 200,000 euros, including 180,000 euros for the property. The renovation costs amount to 800,000 euros. The building was constructed before 1925. Thus, in the first year of use, the investor can deduct 500 euros as depreciation for the old building (2.5%) and 72,000 euros as depreciation for monument protection from his income from renting and leasing as advertising costs. This leads to high tax savings, which depend on marital status, tax class, number of children and other tax advantages.

What are the requirements?

Construction work may only begin after the property has been purchased; the monument protection authority must be consulted beforehand. The individual authorities in the federal states are responsible for monument protection. The future property owner must obtain information from the state authority on the list of monuments to see whether the building is classified as a monument worth preserving. By the locally responsible Monument protection authority the restoration and redevelopment of the property must be approved. To this end, the authorities must be notified of the measures planned by the investor and agreed with them. Once all structural changes have been completed, the monument protection authority in the city administration or in the district office issues a certificate after the building has been accepted, which must be presented to the tax office. Only then can the benefits be fully taxed.

Summary

  • The tax authorities promote the protection and preservation of listed properties with tax advantages.
  • Investors can deduct 100% of their renovation and restoration costs for their rented listed property as income-related expenses on their tax return.
  • The depreciation takes place within 12 years, in the first eight years with 9%, in the following four years with 8% annually.
  • In advance, however, it must be clarified which measures contribute to the preservation of the building fabric of the monument and which are sensible; the responsible monument protection authority must approve the maintenance and modernization measures.
  • In order to be able to assert the advantages for tax purposes, the monument authorities must prove the restoration costs and apply for a certificate for submission to the tax office.


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