Deducting costs of buying buildings and movables on the basis of depreciation
Depreciation refers to deducting costs incurred from purchasing a building and movables, for example, from rental income.
- The cost of the building can only be deducted in the case of houses.
- The cost of movables can be deducted in the case of both flats and houses.
The Tax Administration does not apply depreciation to assets automatically. Taxpayers wishing to make deductions on this basis need to declare depreciation electronically or using a tax return appendix.
The purchase price of assets is usually the price paid to gain rights to the assets. The purchase price also includes any modernisation costs incurred from renovations during property ownership.
The purchase price of let buildings can be deducted from rental income on the basis of annual depreciation. Depreciation means splitting the cost of the property across several years.
|Residential and office buildings – depreciation on the remaining (undepreciated) purchase price||4%|
|Retail units, warehouses, factories, workshops and other similar buildings||7%|
If you have used the building yourself for a part of the year and only rent the building out for another part of a year, i.e. if the rental period begins or ends in the middle of the year, depreciation is calculated based on the period during which the building was being rented out. Depreciation cannot be deducted for the year in which the building is sold.
If you have deducted depreciation for a building you have rented out, any undepreciated purchase costs will be taken into account when the building is sold.
Example: You have bought a retail unit for €100,000 and rented it out to a third party for a year. You have deducted 7% of the purchase price as depreciation. After the year’s rental period is over, you sell the building to the same party that rented it. You can deduct €93,000 of the selling price as purchase costs, since you have already deducted €7,000 as depreciation. You sell the retail unit for €100,000. Therefore, you have made €7,000 of profit (€100,000 – €93,000).
Depreciation cannot be deducted from the purchase price of land. The purchase price of flats or shares in housing co-operatives cannot be deducted on the basis of depreciation either.
As landlord, you may wish to buy furniture or other movables for your rental apartment. If the movables cost more than €1,000, you can deduct the costs from your rental income as annual depreciation at a rate of 25%. You can only make this deduction if the useful life of these movables is over three years. If the purchase cost of the movables are under €1,000 or their useful life is less than three years, deduct them as annual costs in one lump sum.
See a list of other rental flat costs that can be deducted from rental income.