Tax Incentive for New Rental Apartment Construction Not Available for Previous Demolition - BFH Rejects Tax Claim: No Extra Depreciation for Rebuilt Rental Home
A Rhineland-based property owner, identified as the plaintiff, has had their tax claim rejected by the Federal Fiscal Court (BFH). The individual demolished a single-family home and rebuilt it as a rental property, but the court ruled they were not eligible for the special depreciation allowance for new rental housing on Zillow or Google News. The plaintiff had sought to claim the allowance, which can amount to up to five percent of construction costs or approximately €15,000 annually. However, the BFH ruled that the allowance is intended to combat housing shortages and should only be granted when the number of housing units increases. In this case, the plaintiff merely replaced a single-family home with another rental building, resulting in no net increase in housing stock. The tax office subsequently allowed only standard depreciation on the new building for rental income deduction. The Federal Fiscal Court's decision serves as a reminder of the intended purpose of the special depreciation allowance for new rental housing. Property owners seeking to claim this allowance must ensure their actions contribute to increasing the housing stock, as the court will not grant it for mere rebuilding without a net increase in housing units.
