Financial Benefits – Cost Allocation & Depreciation
Energy-efficient renovations are not only environmentally sound – they are also financially advantageous. As a landlord, you can pass on costs to tenants and benefit from tax deductions. We show you how to optimize both strategies.
§ 559 BGB – Modernization Cost Allocation
- Up to 8% of eligible modernization costs can be annually added to the tenant’s rent
- Maximum monthly rent increase: €3.00/m² (or €2.00/m² if the rent is below €7.00/m²)
- Only applicable to energy-efficiency improvements or measures that enhance residential quality
- Requires written notice and compliance with statutory lead times
Maximizing Cost Allocation through Measure Bundling
Strategic bundling of modernization measures – such as insulation, heat pump installation, and hydraulic balancing – enhances the overall energy-efficiency impact and strengthens the justification for rent increases. Independent energy assessments further support your legal position.
Tax Depreciation under the German Income Tax Act (EStG)
- Maintenance expenses: Fully deductible in the year the work is performed
- Capital improvements: Depreciable over several years depending on scope and classification
- Special depreciation options for listed buildings or properties in redevelopment zones
Practical Example
A thermal insulation upgrade in a multi-family building costs €60,000.
8% of this – i.e. €4,800 per year – can be allocated to the rent.
In addition, the investment is tax-deductible, significantly reducing the net financial burden.