What does a higher depreciation mean?

Types of depreciation for real estate

1. Straight-line depreciation (Section 7 (4) ESTG): This depreciation method is applicable to both new buildings and used, rented residential properties. The amount of the depreciation rate is:

  • for properties completed after December 31, 1924, 2 percent
  • for properties that were completed before 1.1.1925 2.5 percent.

Higher depreciation rates are possible if a shorter useful life can be demonstrated.

2. Declining balance depreciation (§ 7 (5) 3.c ESTG): The degressive depreciation is applicable for the last time for properties that were acquired in the year of completion up to December 31, 2005 or for which a building application was submitted before January 1, 2006. The amount of the depreciation rate is:

  • in the year of completion and in the following 9 years each 4 percent,
  • in the following 8 years each 2.5 percent and
  • 1.25 percent in each of the following 32 years.

3. Special depreciation for new rental apartments (Section 7 b ESTG): For the purchase or manufacture of new apartments, special depreciation of up to 5% of the assessment basis per year in addition to the straight-line depreciation can be used in the year of acquisition or manufacture and in the following three years (special-afa-for-new rental housing).

4. Increased depreciation (Section 7 h ESTG): is granted for buildings in redevelopment areas and urban development areas. With an increased depreciation, the competent authority / municipality recognizes and thus benefits from redevelopment measures in a designated redevelopment area. The amount of the depreciation rate is:

  • based on the “certified” renovation costs for 8 years, 9 percent and
  • 7 percent each for a further 4 years.

Increased depreciation means that only the recognized / recognized part of the investment is funded, the rest of the investment is subject to the "normal" linear or degressive depreciation rule.

5. Increased depreciation (§ 7 i ESTG): is granted for architectural monuments. The production costs for construction measures, which are necessary in terms of type and scope to maintain the building as a monument or for its sensible use, can be deducted. The amount of the depreciation rate is:

  • based on the "certified" production costs for 8 years each 9 percent and
  • 7 percent each for a further 4 years.

The increased deductions can only be claimed if the acquisition or production costs are not covered by subsidies from the public purse. Increased depreciation means that only the recognized / recognized part of the investment is funded, the rest of the investment is subject to the "normal" linear or degressive depreciation rule.

6. Exceptional wear and tear: If certain parts of the building have to be removed or a building has to be demolished during a renovation, depreciation can be claimed for extraordinary wear and tear, as well as for natural events such as fire, water and mountain damage, etc. There is no fixed depreciation rate. The estimated depreciation can be deducted in full. The straight-line or declining balance depreciation is continued thereafter.