Rental Income Tax Germany 2026: The Anlage V Guide

Apartment bought, tenant moved in, rent coming in — and now the question: how do I tax all this correctly? The answer is one of the more pleasant ones in the German tax system. In the early years after purchase, most landlords realise a tax loss that directly reduces their employment income and saves thousands of euros in tax. This guide covers the technical “how”, the traps to avoid, and what Anlage V expects from you.

In short: Rental income is Einkünfte aus Vermietung under §21 EStG. You’re taxed only on the net surplus: rent + utility prepayments − Werbungskosten. The key Werbungskosten: AfA (2%/year), loan interest, repairs, property tax, insurance, management. Watch out for the 3-year/15% trap — major renovations in the first 3 years after purchase become construction cost. Everything goes on Anlage V.

The core principle: income minus expenses = surplus

As a landlord you don’t tax the rent — you tax the annual surplus:

• Income: cold rent + utility prepayment (actual utility costs are credited against)
• Werbungskosten: all property-related costs (see below)
• Surplus (income − costs) → taxed at your marginal rate

If costs exceed income, you have a loss — it reduces your total taxable income (e.g. your salary). That’s the core tax advantage in the first years of renting.

AfA: your biggest lever

Absetzung für Abnutzung (AfA, depreciation) is the annual write-off of the building — the single biggest Werbungskosten.

AfA rates 2026

Building	AfA rate	Period
Built before 1924	2.5%	40 years
Built 1924–2022	2%	50 years
Built from 2023	3%	33⅓ years
Commercial	3%	33⅓ years

What’s the AfA base?

Not the full purchase price — only the building share. The land share is not depreciable.

Typical split:

• Urban location: 70–80% building / 20–30% land
• Rural: 60–70% building / 30–40% land
• The notarial deed usually contains the split; if not, estimate using Bodenrichtwert (official land values)

Plus acquisition costs become part of the AfA base:

• Real-estate transfer tax (3.5–6.5% depending on state)
• Notary and land-registry fees
• Purchase broker fees

All split proportionally between building and land.

Worked example

ETW purchase in Leipzig, October 2025:

• Purchase price: €280,000
• Building share (per notarial deed): 80% → €224,000
• Acquisition costs: €22,400 (transfer tax, notary, broker)
• Building share of costs: 80% → €17,920
• AfA base building: 224,000 + 17,920 = €241,920
• Built 2018 → 2% AfA
• Annual AfA: €4,838

Over 50 years, the building value is fully written off — without you spending a single euro. Pure bookkeeping Werbungskosten.

Other Werbungskosten

Loan interest (the second-biggest item)

• Only interest on your loan is deductible, not principal repayment
• The bank sends an annual interest statement
• On a typical 60%-financed €280k purchase (€168k loan at 4%), first-year interest is ~€6,700, gradually declining with amortisation

Ongoing costs

• Property tax (Grundsteuer — municipal assessment)
• Building insurance (Wohngebäudeversicherung, not tenant’s contents)
• Property management (WEG monthly fee, partially)
• Legal insurance (rental law)
• Account fees (separate landlord account)

Repairs (watch out for the 15% rule!)

True maintenance costs are immediately fully deductible:

• Heating service
• Painting
• Appliance repair
• Drain cleaning

But: in the first 3 years after purchase the 15% rule applies (see below). Major renovations in that window can be reclassified as construction costs.

Trips and admin

• Trips to the property (viewings, repair coordination): €0.30/km round trip
• Calls, stationery, bookkeeping software: deductible as office costs

The 3-year/15% trap

The most important cost-trap for new landlords.

The rule

If within the first 3 years after purchase you spend more than 15% of the building value on repairs/modernisations (net of VAT), all those costs are reclassified as construction cost — not immediate deduction.

The consequence

• No immediate deduction as Werbungskosten
• Instead: costs are added to the AfA base and spread over 50 years
• The Finanzamt retroactively reverses any deductions already taken — with interest

Example

You buy an ETW in 2025 for €300,000 (building share €240,000). 15% limit: €36,000.

• 2025: new kitchen + bathroom → €18,000 “maintenance” → claimed.
• 2027: heating replacement → €25,000.
• Cumulative: €43,000 → over 15%.
• All €43,000 is retroactively reclassified as construction cost.
• The €18,000 already deducted in 2025 → back-tax + interest for 2025.
• Future AfA base rises to €283,000 → +€860/year AfA over 50 years.

How to avoid it

• Push major renovations into year 4 after purchase (when possible)
• Spread costs into smaller tranches (small painting, individual appliances)
• Separate repairs (maintaining) from modernisations (improving) — pure repairs don’t automatically fall into the trap even within 3 years

Anlage V: what goes where

One separate Anlage V per rental property:

Income (Part 1)

• Gross cold rent
• Utility prepayments
• Other income (security deposit interest, if kept by landlord)

Werbungskosten (Part 2)

• Loan interest (bank statement)
• Maintenance (repairs)
• Building AfA (calculate yourself, keep proofs)
• Property tax
• Insurance
• Property management
• Other

Result

Income − Werbungskosten = surplus / loss. A loss reduces your other income.

Worked example: typical early years

Petra buys her first rental in 2026 for €300,000 (building share 75% = €225,000, built 2010). Financing: 70% debt (€210k loan at 4% interest). Rent: €950 cold + €180 utility prepayment.

Income 2026:

• Cold rent: 950 × 12 = €11,400
• Utilities: 180 × 12 = €2,160
• Total: €13,560

Werbungskosten 2026:

• Building AfA 2% × €243,000 (with acquisition costs) = €4,860
• Loan interest (first year): €8,400
• Property tax: €650
• Insurance: €320
• Property management: €480
• Utilities offset (actual costs €2,100): €60 net
• Total: €14,710

Result: 13,560 − 14,710 = −€1,150 loss.

At a 75k salary and 35% marginal rate: the loss reduces Petra’s tax by ~€400.

This loss repeats in the first 5 years (shrinking as interest decreases). Cumulative: several thousand euros in tax savings, with no real cash outflow (AfA is pure bookkeeping).

Vacancy: still deductible?

If the apartment is vacant for a while:

• Less income (only rental months)
• Same Werbungskosten (AfA, interest, property tax keep running)

Result: larger loss in the vacant year — which can actually be tax-favourable.

Requirement: intent to rent must be provable. Document:

• Ads (Immoscout, eBay classifieds, realtor) with dates
• Correspondence with prospective tenants
• Realtor contract

Without provable rental intent (e.g. deliberate vacancy for own use or sale prep), the deduction is denied.

Renting to relatives below market

Many people rent to children or siblings below market rate. The rule (§21 Abs. 2 EStG):

Rent vs. market	Werbungskosten deduction
≥ 66%	Fully deductible
50–66%	Fully deductible, but market comparison documented
< 50%	Pro-rated — only the rented percentage is deductible

Safest play: at least 66% of market rent — no discussion. On €800 market rent: €528 is enough for full deduction.

Common mistakes

1. AfA not claimed or wrong. Often forgotten — the single biggest item.
2. Land share included in AfA. Land isn’t depreciable.
3. Major renovation in year 1-3. 15% rule missed → reclassified as construction cost.
4. Principal repayment entered as Werbungskosten. Only interest counts; principal is capital movement.
5. No proof for vacancy. Without ad screenshots, no deduction for the empty months.
6. Forgetting to claim during vacancy. Those who don’t enter interest leave thousands on the table.
7. Below-market rent without market comparison. In disputes, the Finanzamt decides against you.

Related topics

• Handyman deduction §35a — for owner-occupied properties (not rentals)
• Renovation subsidy tax bonus — for energy-efficient modernisation
• What to do when you get a Finanzamt letter — when Anlage V queries arrive

How Restio helps

Rentals involve many small movements over years — and AfA calculations that everyone gets wrong the first time. Restio helps:

• AfA calculator — enter purchase price, construction year, building share, Restio shows your AfA base and annual depreciation.
• 15% guardian — an alert when your cumulative repairs approach the 15% limit. Plus a recommendation of what to push to year 4.
• Receipt scanner — photo of the property tax notice, property manager statement, repair invoice. Restio auto-assigns to the correct Anlage V line.
• Anlage V simulator — see your live annual result, and how changes (new rent, repair, interest) affect your tax.
• Instant answers — “Is my utility prepayment income taxed?”, “Can I still claim AfA during vacancy?”, “What happens if I sell before 10 years?” — in English or German.

Renting is one of those tax areas that, once understood, runs for decades. Know the rules and you have one of the few legal “loss levers” the tax system provides — while simultaneously building real wealth.