Last Updated on October 28, 2025
Own a German rental property or interested in investing in one? Would you like to learn more about the property tax deductions available to help reduce your rental income tax in Germany? Whether you’re a German resident or nonresident, it’s important to understand the various rental property expenses you may be able to deduct to reduce your tax liability.
According to the law, all rental income must be reported on your German tax return, and in most cases, the associated expenses can be deducted. Thousands of German landlords pay more taxes on their rental revenue than they should every year.
Why? Because they do not take advantage of all of the allowable tax deductions in Germany available to landlords. Almost no other investment offers more tax advantages than rental real estate, aside from the possibility for consistent income and capital growth.
These benefits can often be the difference between losing money and making money on a rental property. In fact, you can exclude a wide range of expenses from your income to lower your tax burden. Remember to keep your business and personal transactions distinct, hence why we recommend registering a business bank account.
Key Takeaways
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Many rental property expenses in Germany are tax-deductible, including mortgage interest, depreciation (AfA), repairs, insurance, and property management costs.
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Pre-rental expenses (e.g., financing costs during construction) can often be deducted before the property is rented out.
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Depreciation begins only once the property is ready for rental and spreads over its useful life.
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Keeping detailed records of all costs is essential to maximize allowable deductions and avoid issues with the tax office.
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Professional tax advice can help non-resident landlords claim all eligible deductions and optimize tax savings.
Tax-Deductible Expenses for German Rental Property Owners
Financing and Acquisition Costs for German Rental Properties
- Financial Costs for German Rental Properties – mortgage interest, bank fees, loan costs.
- Appraiser and Surveyor Expenses (Gutachterkosten) – property valuations for financing or depreciation.
- Land Registry Fees (Grundbuchkosten) – costs for registering property ownership.
- Interest on Debt (Financing Costs) – mortgage interest, renovation loans, expansion loans.
- Notary and Legal Fees – property purchase notary fees, acquisition-related legal costs.
- Demolition Costs – if demolition is done for future rental use.
- Ground Rent (Erbbauzins) – leaseholder fees for the land.
Rationale: These are all costs related to purchasing, financing, or acquiring the property.
Financial Costs for German Rental Properties
If you use outside capital for the property you rent out, these financing costs may be deductible (interest on debt and closing fees can also be considered). In a nutshell, interest is on money borrowed to buy or renovate the rental property. You can also claim bank fees associated with applying for finance.
Example: “Mortgage interest on a €200,000 property loan and associated bank fees can be claimed as deductible financing costs.”
Appraiser and Surveyor Expenses (Gutachterkosten)
The costs of a surveyor (Gutachter) are deductible as acquisition expenses (Anschaffungskosten). A property valuation for the purpose of getting financing or a depreciation valuation of chattels can also be claimed.
Example: “Property valuations for financing or depreciation purposes can be claimed as acquisition-related expenses.”
Land Registry Fees (Grundbuchkosten) Deductible for Rental Properties
The land registry costs can be deducted as well.
Example: “Costs incurred for registering property ownership at the land registry are deductible as acquisition expenses.”
Interest on Debt (Financing Costs)
Interest on debt for a rented house and real estate (for construction, purchase, expansion, conversion, and renovation) is deductible as financing costs in Germany.
Example: “Interest paid on a mortgage for purchasing, expanding, converting, or renovating a rental property can be claimed as a deductible expense.”
Notary and Legal Fees
Legal expenses incurred during the purchase of the real estate can be deducted from your tax return as acquisition expenditures (Anschaffungskosten).
Example: “Costs for notarizing property purchase contracts or legal fees related to property acquisition are deductible as acquisition-related expenses.”
Ground Rent (Erbbauzins)
A leaseholder’s ground rent (Erbbauzins) is deductible as an income-related cost (Werbungskosten).
Example: “Leaseholders paying annual ground rent for the land their property stands on can include these payments as tax-deductible expenses.”
Demolition costs
If the owner intends to use the German property after the demolition, the demolition costs are deductible.
Example: “Expenses for demolishing a building before constructing a new rental property can be claimed as income-related costs if the property will continue to be used for rental purposes.”
Management and Administrative Expenses
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Real Estate Agent Fees and Letting Costs – tenant-finding, rent collection, property management.
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Business-Related Travel Expenses – trips to inspect property, meet tenants, visit banks.
Rationale: These are operational or administrative expenses related to managing the rental property but not directly tied to financing or physical maintenance.
Real Estate Agent Fees and Letting Costs
You can also deduct the agent letting fees accumulated from renting out your property because they are considered income-related expenses. You can also consider rent collection fees.
Example: “Fees paid to agents for finding tenants or collecting rent can be fully deducted as Werbungskosten.”
Business-Related Travel Expenses
Travel costs are among the most typical business expense deductions. Trips to the property (such as property inspections while a tenant is present), to the bank, and appointments with real estate brokers are all accounted for on your tax return. For this, a mileage logbook should be kept.
Example: “Trips to inspect the property, meet tenants, or visit banks are deductible; keep a mileage log for proof.”
Property Management and Maintenance Expenses
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Deducting Construction Defects and Repairs – fixing structural defects, plumbing, roofing.
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Maintenance Expenses for Rental Properties – door replacements, electrical upgrades, repainting.
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Renovation Costs for Tax Deduction – kitchen/bathroom renovations, flooring, remodeling.
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Claiming Utility Expenses on Your German Tax Return – heating, hot water, electricity.
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Janitor and Property Management Costs – cleaning, building management fees.
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Gardening and Lawn Mowing Costs – upkeep of gardens and common areas.
Rationale: All ongoing upkeep, repairs, or property operation expenses fall here. Utilities are included because they are necessary for maintaining the property’s functionality for tenants.
Deducting Construction Defects and Repairs
If defects in the construction are repaired, you can deduct the expenses.
Example: “Repairing structural defects, such as fixing a leaking roof or replacing faulty plumbing, is tax-deductible.”
Maintenance Expenses for Rental Properties
Which expenses are considered maintenance? These could be for example door replacements, installation of electrical systems, etc.
Example: “Routine maintenance like door replacements, electrical system upgrades, or repainting walls can all be claimed as deductible expenses.”
Renovation Costs for Tax Deduction
Renovation costs are tax-deductible because they are considered maintenance expenses.
Example: “Expenses for renovating kitchens, bathrooms, or installing new flooring qualify as deductible maintenance costs.”
Claiming Utility Expenses on Your German Tax Return
On your German tax return, you can also claim utility costs such as heating and hot water.
Example: “Heating, hot water, and electricity costs for the rental property are deductible as income-related expenses.”
What Counts as “Werbungskosten” (Income-Related Expenses)
Janitor costs (cleaning and property management costs) / (Werbungskosten).
Example: “Fees paid to janitors for cleaning common areas or hiring a property manager to handle tenant issues are deductible as Werbungskosten.”
Gardening and lawn maintenance costs
Example: “Hiring a gardener to maintain communal gardens or paying for lawn mowing for the rental property is tax-deductible.”
Marketing and Administrative Costs You Can Deduct
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Advertising Fees for Tenants – ads to attract tenants.
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Accounting and Tax Advisory Fees – bookkeeping, tax filings, professional guidance.
Rationale: These are administrative or promotional expenses that support renting the property but aren’t physical maintenance or financing.
Advertising Fees for Tenants
The expenses of advertising for tenants are also tax-deductible in Germany.
Example: “Costs of online or print ads to attract tenants for your rental property are deductible as Werbungskosten.”
Accounting and Tax Advisory Fees
Fees for the continuous expenses of managing your rental accounts, completing tax returns, and seeking guidance.
Example: “Fees for bookkeeping, preparing rental property tax returns, or consulting a tax advisor are fully deductible as income-related expenses.”
Timing / Miscellaneous
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Timing of Deductions – refers to the rules for when expenses can be claimed.
Rationale: This can stand as a separate section because it explains tax rules rather than specific types of expenses.
Timing of deductions
| Deduction Type | When Deductible? | Notes |
|---|---|---|
| Mortgage Interest | During construction & after | Fully deductible as “pre-rental expenses” |
| Depreciation (AfA) | From rental start (e.g., 2026) | Spread over property's useful life |
| Acquisition Costs | Capitalized | Written off via depreciation |
| Repairs & Maintenance | Any time during rental period | Fully deductible |
Read also:
- Property tax in Germany – How much tax do I have to pay on my German rental income
Which rental expenses cannot be claimed on your German tax return?
Personal contributions cannot be claimed.
The German tax authorities do not recognize personal contributions (Eigenleistungen), thus they cannot be claimed on your German tax return. These include:
- A property’s valuation for the purpose of purchasing it
- The cost of improving the property, including any renovations and repairs undertaken before the first tenant moved in
- The expense of restoring a dilapidated property to a rentable condition following the purchase
- Your mortgage’s principal repayments
- Any costs incurred in the search for a suitable house to buy
Can I deduct mortgage interest before renting starts?
Yes, as “pre-rental” expenses.
When does depreciation (AfA) begin?
Only once the property is ready to rent.
Who are we?
Property Tax International (PTI Returns) is a part of CluneTech (previously Taxback Group), which employs over 1,500 individuals in more than 20 countries. We have over 25 years of international tax experience, and our tax professionals will keep you tax-compliant in Germany.
Who can help me file my German tax return?
If you are looking for property tax advisors, you are on the right page. PTI Returns’ tax experts will help you file German tax return online if you are a nonresident who earns income from a rental property. They will take care of all the paperwork, save you time and stress, and will claim all the applicable property expenses, so you don’t pay more tax than you should.