Which tax advantages exist for rented property?

German tax treatment of rental income is structured to encourage long-term investment in housing, and the deductions stack up in landlords' favour for a long time.

Mortgage interest on the loan that financed the property is fully deductible against your rental income each year. The principal repayment is not — that's not technically an expense.

Depreciation (Abschreibung) lets you write down the building's value over its useful life. The most common case is residential property built after 1924, depreciated linearly at 2% per year over 50 years; new builds and specific categories of property can have higher rates.

Maintenance and repairs are generally deductible in the year they occur, while major improvements that meaningfully increase the property's value are capitalised — added to the depreciation base rather than deducted immediately. The distinction matters and is one of the things a Steuerberater genuinely helps with.

Other deductible costs include property management fees, accounting, insurance on the property, certain travel to inspect or manage the property, and ancillary costs you can't pass on to tenants.

The combined effect: in the first 10–20 years of ownership, your taxable rental income is often low or even negative, even while the property is generating positive cash flow. That's the structural advantage of German buy-to-let.

There's also one important rule on selling: capital gains on private rental property held for more than ten years (Spekulationsfrist) are normally tax-free. Selling inside the ten-year window triggers full income tax on the gain — which is why long holding periods are usually rewarded.