What is a residual useful life appraisal?
A residual useful life appraisal estimates the remaining economic lifespan of a building. It does not concern market value or sale price, but focuses solely on the question:
How long can the building still be used economically based on its current condition?
The appraisal is prepared by qualified experts and typically takes into account:
- the structural condition,
- the scope of previous modernisations,
- the technical building systems,
- energy-related characteristics.
The objective is a plausible and comprehensible assessment, not an exact prediction. Such appraisals are only applicable in well-founded individual cases and do not automatically replace standard depreciation rates (cf. Section 7 (4) German Income Tax Act).
How does depreciation generally work?
For tax purposes, residential buildings are often depreciated over an assumed useful life of 50 years, resulting in a linear depreciation rate of 2% per year.
However, the law explicitly allows deviations from this assumption if the actual useful life is shorter and this can be substantiated (Section 7 (4) sentence 2 German Income Tax Act).
Courts have confirmed that such proof may also be based on structured valuation models, provided they are applied appropriately and well justified (e.g. Federal Fiscal Court, case IX R 14/23). Each case is reviewed individually by the tax authorities.
Why only the building value is depreciable
A key point that is often misunderstood:
Only the building itself can be depreciated – not the land.
Land is considered non-depreciable for tax purposes and is therefore permanently excluded from depreciation. This means:
- the purchase price of a property must be allocated
- between a land component (not depreciable)
- and a building component (depreciable).
Only the building portion is relevant for depreciation and therefore also for a residual useful life appraisal. This separation is mandatory and clearly required by case law.
How is the purchase price allocated?
In practice, several approaches are used:
- The tax authorities often apply a standardised calculation tool, where land value is determined by multiplying the standard land value by the plot size.
- The allocation stated in the purchase contract may serve as an indication, but is not automatically binding.
- Expert valuations are considered particularly reliable, especially where there are significant deviations from standard land values.
Courts regularly recognise appraisals when they are coherent and realistically reflect local conditions (e.g. decisions by the Berlin-Brandenburg and Düsseldorf Fiscal Courts).
In Berlin, the annually published standard land values provide an important basis for this allocation.
Which factors influence the remaining useful life?
The remaining useful life does not depend solely on age, but primarily on the condition of the building. Key factors include:
- condition of roof, façade and load-bearing structure,
- age and condition of heating systems, pipes and electrical installations,
- scope and quality of previous refurbishments,
- energy efficiency standard.
Missing or only partial modernisations can shorten the remaining useful life. Conversely, comprehensive measures may extend it. Valuation models under the German Real Estate Valuation Ordinance (ImmoWertV) address these aspects systematically, but do not replace an individual assessment.
Typical cases in Berlin’s existing housing stock
In the Berlin market, residual useful life appraisals are particularly relevant in the following situations:
- pre-1925 buildings without comprehensive modernisation,
- existing apartments with outdated building services,
- condominium associations with refurbishment needs in common property,
- buildings where energy upgrades are foreseeable but not yet implemented.
In all these cases, an individual assessment is essential.
Owners residing abroad
Property owners living outside Germany may also be affected. Rental income from properties located in Germany is generally subject to German taxation.
Depreciation – including an adjusted residual useful life – can usually be taken into account. The impact in the country of residence is governed by applicable double taxation agreements. A German tax return is generally required.
What tax authorities focus on
Tax offices review residual useful life appraisals carefully. Common reasons for rejection include:
- insufficient qualifications of the appraiser,
- lack of or only superficial on-site inspection,
- purely schematic assessments without reference to the specific building,
- insufficient consideration of individual characteristics.
Standard depreciation rates remain the norm. Deviations are possible but must be well substantiated. Current case law confirms this approach without lowering the requirements.
FAQ – brief answers
What does a residual useful life appraisal cost?
Costs depend on the property and the scope of the appraisal and are not regulated by law.
Is a valuation model sufficient?
Yes, provided it is applied appropriately and justified in a comprehensible manner.
How up to date must land values be?
In Berlin, they are determined annually as of 1 January.
Does this also apply to condominiums?
Yes, based on the proportionate building and land value.
Does energy efficiency matter?
Yes, particularly when assessing economic useful life.
Initiate an appraisal without obligation
Would you like to commission a residual useful life appraisal or check whether it makes sense for your property?
Via the link below, you will be directed to our specialised partner. There, you can initiate an appraisal easily, in a structured and non-binding way, and submit the required information step by step.
➡️ Residual useful life appraisal via Nutzungsdauer.com
Legal notice
ADEN Immobilien does not provide tax, legal or valuation advice and does not prepare residual useful life appraisals itself.
The information in this article is provided for general guidance only and does not replace individual tax or legal advice. The recognition of a residual useful life appraisal is always subject to a case-by-case decision by the competent tax authority.
The provider linked above is an independent external partner who prepares and offers residual useful life appraisals on their own responsibility. ADEN Immobilien assumes no responsibility or liability for the content, results or tax usability of appraisals prepared by this provider.
For tax implementation, we expressly recommend consulting your tax advisor.
