Energetic renovation measures: How can real estate owners benefit from a tax perspective?

Since 2020, energetic renovation measures on the owner-occupied home have been eligible for tax incentives for ten years. Corresponding expenses can be deducted directly from the tax liability.

• Which measures are subsidized?
• What should be considered?
• What alternative funding options are there?

Our experts around the property give you tips and answers to 10 questions from the practice of tax incentives for energy refurbishment of your home, including possible financing alternatives.

10 tips for the energetic renovation of the home and their tax incentives

By subsidized energetic refurbishment measures at the own home one saves in the result doubly: The energy costs sink, and 20% of the modernization expenditure (max. 40,000 EUR) are chargeable to the tax liability.

What is important, what should be considered? We have summarized the answers to questions from practice for you.

1. Which measures are eligible?

Beneficiaries are specific measures carried out by a specialist company, such as thermal insulation, window replacement or the renewal of the heating system.

2. Who can claim the tax reduction?

Individuals subject to unlimited income tax liability are eligible. In principle the applicant must be the owner. Persons entitled to heritable building rights can also claim the benefits.

3. On which objects can the measures be carried out?

The tax reduction is granted for energy refurbishment measures on a building used for own residential purposes located in the EU or the EEA. Furthermore, the beneficiary property must be older than 10 years at the start of the measure.

4. What amount can a tax reduction be applied for?

A tax reduction can be claimed in the income tax return in the year of completion of the measures and in the following year at 7% (maximum €14,000 each) of the expenses and in the year after next at 6% (maximum €12,000) of the expenses. Within the limits of the maximum amounts, the costs of an energy consultant may be claimed in the amount of 50% of the expenses in the year of completion of the measure.

5. When can the expenses not be taken into account as a tax reduction?

If the expenses have already been taken into account elsewhere in the income tax return, or if interest-subsidized loans or tax-free subsidies from publicly funded measures have been granted, no further recognition is required.

6. What evidence must be provided?

Proper performance must be evidenced in accordance with an officially prescribed model by certification from the specialist company or other authorized person in addition to the invoice and non-cash payment.

7. Are there alternatives to tax incentives?

As an alternative to tax incentives, subsidy programs from the KfW or BAFA can be used. KfW loans offer favorable conditions and repayment subsidies of up to 50% (depending on the measure). Important to know: You cannot apply for KfW loans directly; the application must always go through a bank. It is not possible to cumulate the tax subsidy for the same energy-efficient renovation measure with other federal subsidy programs.

8. Are measures also funded which do not contribute to the energy improvement?

Not every renovation and modernization measure contributes to energy improvement. For example, the renovation of bathrooms or floors. As a property owner, you have the option on the one hand of carrying out the renovation measures via a construction loan (secured by land charge) at very favorable conditions. Many banks also offer renovation loans without land charge security. Although the conditions for this are somewhat higher than for a construction loan, the renovation loan is characterized by extremely uncomplicated processing.

9. Are there also subsidy options if the renovation is paid for out of equity?

If no loan is required, investment grants can be applied for via BAFA. Also the technical planning and construction supervision is promoted via grants. These can be applied for directly through KfW.

10. Where can I get advice?

It is recommended to get advice from accompanying craftsmen. These often work hand in hand with energy consultants. In addition, banks and tax advisors usually also have the relevant expertise and network.