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03Service 03 of 04, tax structureTax-optimised structuring of German rental property for expats
LDP brings the property, the financing and the renovation plan to the tax firm Helm & Partner before you buy, so the tax levers work from day one: depreciation on the right basis, a defensible land and building split, renovation costs treated correctly and the ten-year rule. Helm & Partner sets the structure; LDP gives no tax advice.
Median from LDP's published business cases (anonymised); the rates are statutory and apply to every buyer.
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The tax levers in a rental purchase
German rental income is taxed at your personal rate after deductions. The deductions are where the structure lives. These are the ones Helm & Partner checks on every purchase we bring to them, and then applies in the return.
| Lever | What it does |
|---|---|
| Depreciation (AfA) | The building, not the land, is written off over its useful life, 2 percent a year for most existing buildings. A shorter remaining life can be substantiated with an appraisal. |
| Land and building split | Only the building depreciates. The split between land value and building value in the purchase contract and the appraisal decides how much of the price you can write off. |
| Renovation costs (Kernsanierung) | Costs within three years of purchase that exceed, net of VAT, 15 percent of the building's acquisition cost become acquisition cost and are depreciated with the building. Below that line they are deductible as maintenance only if they do not raise the standard of the flat: a full renovation that improves at least three of heating, sanitary, electrics and windows is capitalised in any case (BMF letter of 26 January 2026). |
| Maintenance expenses (Erhaltungsaufwand) | Repairs that keep the property in its condition are deductible in full, or spread over two to five years to match your income. |
| Income-related expenses (Werbungskosten) | Loan interest, management fees, Hausgeld other than the reserve fund, insurance, travel to the property, advisory fees: all deductible against rent. |
| Ten-year rule | A sale more than ten years after purchase is free of income tax on the gain for privately held property. The holding period and the exit are part of the plan from the start, set with the tax firm. |
| Co-living specifics | Room-by-room letting raises gross rent per square metre; furnishings are depreciated separately from the building, and the management structure is set up so the additional income is documented cleanly. |
Tax levers in a German rental purchase
What we do not do: listed buildings (Denkmalschutz) with their special depreciation are not our focus, and we do not build structures around a single tax effect without a sound property underneath. The property has to work before tax; the structure makes it work better after.
First-year figure from each case calculation, averaged per concept. It depends on the client's marginal rate, the land and building split and the renovation plan. Range across all published cases: 4,800 EUR to 58,320 EUR.
Who gives the advice, and how it fits together
LDP is not a tax advisor and does not act as one. Tax advice, the annual return and any correspondence with the tax office come from Helm & Partner, a German tax firm, with a dedicated contact for LDP clients. What LDP does is bring the property, the financing and the renovation plan to the tax advisor before the purchase, so the structure is decided while it can still be changed: the split in the contract, the timing of renovation work, the treatment of furnishings, the holding period.
Structure review of the specific property with Helm & Partner, in English.
Land and building split documented, renovation plan timed against the 15 percent line.
The annual German tax return for the property, prepared by Helm & Partner where you engage them for it.
Sale timing against the ten-year rule, and what a sale does to depreciation already claimed.
If you live outside Germany
As a limited taxpayer you declare the German rental income in Germany and you do not receive the basic tax-free allowance on it; under section 50 of the Income Tax Act the allowance is added back before the rate applies. The deductions above still apply in full, which is why the structure matters more, not less, for non-resident landlords. Whether Helm & Partner also prepares your annual German return depends on the case and is agreed with you at the start; many EU-resident clients use it, some have their own advisor at home who files it.
Our guide on how expats reduce tax on German rental property walks through the numbers with a worked example, including what depreciation does at the exit.
Tax structuring at a glance
What is not included
- Tax advice from LDP itself; every advice question goes to Helm & Partner.
- Tax planning in your home country, other than pointing your local advisor to the German figures.
- Denkmalschutz depreciation structures.
- Structures whose only purpose is a tax effect, without a property that works before tax.
Frequently asked questions
Does LDP give tax advice?
No. LDP prepares the purchase figures and coordinates the tax side; the tax structure is set by our partner firm Helm & Partner, which also gives the tax advice, prepares the return and deals with the tax office. You get one process and two responsible parties: LDP for the property and Helm & Partner for the tax law.
How much of the purchase price can I depreciate?
Only the building share, at 2 percent a year for most existing buildings. The land share cannot be depreciated, which is why the split between land and building in the contract and appraisal is one of the first things we settle. A shorter remaining useful life can be substantiated with an appraisal and raises the annual rate.
Are renovation costs after purchase deductible?
It depends on the amount and the timing. Costs within three years of purchase that exceed, net of VAT, 15 percent of the building's acquisition cost count as acquisition cost and are depreciated with the building. Costs below that line, or after the three years, are deductible as maintenance unless the work raises the standard of the flat: a full renovation that improves at least three of heating, sanitary, electrics and windows is capitalised in any case (BMF letter of 26 January 2026). We time the renovation plan with that line in view, and Helm & Partner confirms the tax treatment.
Is the annual German tax return part of the service?
It can be. Helm & Partner prepares the return for the property for clients who engage them, which most EU-resident clients do. If you have your own advisor who files German returns, LDP hands over the figures instead. This is agreed at the start of the engagement.
What happens to the tax if I sell after eight years?
For privately held property a sale within ten years of purchase is a taxable private sale and the gain, including the depreciation you have claimed, is taxed at your personal rate. After ten years the gain is free of income tax. We plan the holding period and the exit with that date in view from the purchase.