Evidence of a shorter remaining useful life: have the requirements been relaxed?

For rental properties, acquisition and construction costs may be depreciated over the useful life of the building and deducted for income tax purposes. In many cases, a flat-rate useful life of 50 years applies. Until now, the requirements for proving a shorter actual useful life were high. A letter from the Ministry of Finance on this subject has now been revoked.

Standard useful life for depreciation of rental properties

When a property is rented out and therefore generates income from letting for tax purposes, the acquisition costs (purchase of the property) or construction costs (building a property) may be deducted from taxable income. These costs are usually claimed through depreciation over the building’s so-called useful life.

With every purchase of a property (for example, buying an existing building), a new standard useful life begins, regardless of the actual age of the building.

Example: If you buy a property with a house built in 1930 in the year 2025, the statutory useful life for tax purposes is automatically 50 years, starting in 2025. For older buildings (before 1925) or new buildings (from 2023 onwards), different standard useful lives apply.

Problem: a shorter actual useful life?

In practice, the actual useful life of a property may be significantly shorter than the standard useful life specified in the Income Tax Act.

Section 7 (4) sentence 2 of the German Income Tax Act clearly states that a shorter actual useful life may be used as the basis for depreciation if it can be proven.

This is an attractive option for many property buyers, as it allows higher depreciation over a shorter period and therefore leads to a greater annual reduction of taxable income. In recent years, numerous taxpayers have attempted to apply for a shortened remaining useful life at their local tax office.

However, not all of these attempts were successful. Disagreements often ended up in court because tax offices tended to apply stricter standards than property owners — and later, stricter than the highest court rulings.

Federal Fiscal Court 2021 and Ministry of Finance 2023: requirements for proving a shorter useful life

The Federal Fiscal Court (BFH) eventually addressed the question of how a shorter actual useful life may be demonstrated.

The Court ruled that any suitable method of presentation may be used to provide the required proof. A structural engineering report was explicitly not mandatory, although the technical reasoning should be prepared by an appropriately qualified expert (BFH ruling of 28 July 2021, case IX R 25/19).

Following this ruling, tax offices received numerous “remaining useful life reports” in varying formats and qualities. However, the tax administration did not implement the decision in practice.

In reaction, the Federal Ministry of Finance issued a statement on 22 February 2023 imposing very high practical hurdles for proving a shorter useful life. In particular, it required:

• detailed documentation of the building’s structural condition, and
• justification for why the property could no longer be used economically at the end of the shorter useful life.

At the same time, the Ministry excluded the use of remaining useful life derived from a proper valuation report conducted under the German Property Valuation Ordinance (ImmoWertV).

New BFH ruling in 2024

Unsurprisingly, further legal disputes followed. In January 2024, the BFH again ruled on the issue (BFH ruling of 23 January 2024, case IX R 14/23). The Court clarified that the remaining useful life may indeed be demonstrated through the correct application of the Property Valuation Ordinance. The key requirement is that the calculations must be carried out by a qualified expert.

In doing so, the Court expressly contradicted the Ministry’s strict interpretation from 2023 and rejected what it considered to be excessive requirements. Once again, the tax administration did not adopt this ruling in practice.

Ongoing discussions aimed at creating greater legal certainty — possibly by amending legislation or introducing more detailed regulations — have so far not resulted in changes.

New Ministry of Finance Statement (1 December 2025)

The Federal Ministry of Finance has now withdrawn its previous statement from 2023 with effect from 1 December 2025. As a result, it has abandoned the excessively strict requirements for proving a shorter remaining useful life.

This means that, at present, only the court rulings of the Federal Fiscal Court remain in effect.

How individual tax offices will handle this situation is not yet clear. However, with the withdrawal of the 2023 statement, there is no longer a nationwide binding guideline imposing stricter requirements.

If there are indications in a specific case that the remaining useful life of a building may be shorter than the standard tax useful life, it may currently be advisable to obtain a properly prepared remaining useful life report. The expert should ideally be publicly appointed and sworn, or certified according to DIN EN ISO/IEC 17024.

Typical indicators of a shorter remaining useful life include:

• an advanced age of the building, and
• a lack of modernisation.

If the last purchase of the property is not too far in the past, a significant tax benefit may be achievable.

Note: Key modernisation measures that may argue against a shorter useful life include roofing including insulation, modernisation of windows and external doors, installation systems, heating systems, bathrooms, interior refurbishment, external wall insulation, and substantial improvements to the floor plan.

Our advice

It cannot be ruled out that the Ministry of Finance or the legislator will again address the issue of proving a shortened useful life. Future changes to the legal framework or formal requirements remain possible.

Therefore, it is currently advisable to seek individual professional advice before purchasing a rental property. Expert guidance helps ensure that the evidence for a shorter remaining useful life complies with court requirements and can be successfully asserted for depreciation purposes.

Please feel free to contact us.

Please note: This article does not constitute personalised tax advice. It provides only a general overview . Individual advice tailored to your specific circumstances is always necessary.