A tax court reduces special depreciation to "rubble". Landlords beware.

The dispute:
A landlord couple had their dilapidated rental property demolished in order to build a new house on the site for re-letting. In their income tax return, the couple wanted to claim the special depreciation allowance for the new rental property of 5 % of the production costs per year.

The special depreciation amounts to up to 5 % of the acquisition or production costs in the first four years after completion - in addition to the regular building depreciation of 3 % per year.

The decision:
However, the Cologne Fiscal Court rejected the turbo depreciation and stated that this only applied to new, previously non-existent apartments. The newly created apartment had already existed - in the demolished building. 
Total demolition and new construction would not have resulted in an additional apartment, meaning that the purpose of the subsidy would have been missed. 
Particularly explosive: According to the financial judges, it is not decisive how long the property lay fallow between demolition and new construction. 

If you think about it further ...
Did the ancient Romans perhaps once settle on your rental property? If so, the special depreciation allowance for your new build may be at risk.

The Federal Fiscal Court is now examining in appeal proceedings whether this can really be the case.

As a landlord, are you affected by this ruling?

👉 Talk to us. We are monitoring further case law. We are also happy to help you with other tax-related questions and concerns: www.wsb-berater.com/leistungen

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