Tax Hammer 2026: Depreciate property faster – how landlords can benefit
Those who rent out property usually think in long timeframes. Until now, this also applied to tax depreciation. However, this could change from 2026, as faster depreciation for residential buildings is planned.
Higher depreciation rates or a declining balance model reduce the time it takes for an investment to become tax-efficient. This creates earlier liquidity, which is a clear advantage, especially with increased financing costs.
Landlords and investors benefit particularly from this because the post-tax cash flow improves. At the same time, rental income and ongoing costs remain the same, so the overall economic situation appears more stable.
Note: As per the current state of discussion (assumption for 2026), a noticeable acceleration of depreciation is planned. However, how exactly this will be implemented – for example, through higher linear depreciation or a declining balance option – will only be decided by the legislative process. The following examples therefore serve for better guidance.
What does „depreciate faster“ mean in concrete terms?
Depreciation (AfA) spreads the cost of a building over many years. If the annual depreciation rate increases, taxable income decreases more quickly, meaning less tax is paid sooner.
This improves the cash flow after tax, even though the actual income remains unchanged. At the same time, the property is economically maintained in full.
For many years, the linear depreciation for residential buildings was 2 percent per year. If the rate were to increase to 3 percent in the future or a declining balance model were additionally introduced, this effect would be significantly amplified.
Calculation check (Assumption): Purchase price £600,000, of which £150,000 is land value (non-depreciable). This results in a building share of £450,000.
• For 2 % linear: €9,000 depreciation per year → approx. €3,780 tax saving
• For 3 % linear: €13,500 depreciation per year → approx. €5,670 tax saving
• For 5 %, on a declining balance basis in the first year: €22,500 depreciation → approx. €9,450 tax saving
Conclusion: A faster depreciation of fixed assets increases net cash flow, particularly in the initial years.
Accelerated depreciation is particularly worthwhile for whom?
- Investors in new-build properties: High construction costs have a faster tax effect, so the liquidity effect kicks in early.
- Buyers of existing properties A high proportion of buildings significantly increases the depreciation base.
- High earner landlord Every additional euro of depreciation significantly reduces the tax burden.
- Portfolio investors: Selling and then buying back the asset can result in a new basis for depreciation.
The key factors: proportion of buildings, refurbishment and timing
Optimise building share: The amount of depreciation depends on the proportion of the building. If the land value is set too high, the depreciation will be lower. That is why a clear and well-justified allocation is particularly important.
2) Understanding refurbishments: Expenditure may either be immediately deductible or classified as construction costs. As this distinction is not straightforward, it should be planned for at an early stage.
3) Choosing the right timing: Depending on the legal situation, the date of acquisition or completion determines which depreciation model applies. Forward-looking planning therefore ensures more favourable tax conditions.
Typical mistakes - and how to avoid them
Error: The land value has been set too high across the board
Solution: Market-driven allocation and clear documentation
Error: Renovations carried out without prior planning
Solution: Check the tax implications of measures in advance
Error: Incorrect depreciation model selected
Solution: Compare different options
Effects on yield and financing
Accelerated depreciation improves free cash flow, particularly in the early years. It is during this phase in particular that interest payments and maintenance costs often place a heavy strain on the budget.
- The impact of interest charges is being mitigated, because the tax savings take effect immediately.
- Room for debt repayment is increasing, as there is more net cash flow available.
- Purchase prices can be better justified, because post-tax profits are rising.
- Risks in the portfolio are falling, as reserves can be built up at an early stage.
Important: Depreciation is not a gift, but a deferral. Those who depreciate more at the start will have lower amounts to depreciate later on. That is why the optimal choice always depends on the holding period, the interest rate and the tax rate.
Your 5-point plan up to 2026
- Check objects: Which properties are particularly profitable?
- Calculate AfA scenarios Linear or declining balance compared.
- Prepare division: Clearly define land and building components.
- Planning renovations: Consider tax implications early on.
- Approve funding Include post-tax cash flow actively.
Quick Check for Decision Makers
• Holding period of less than 10 years? → Declining depreciation may be advisable
• Long investment horizon? → Straight-line depreciation ensures stability
• High interest? → Every depreciation euro acts like a financial buffer
Conclusion: Prepare now, profit from 2026
Accelerated depreciation is a real return lever. Those who actively manage the building share, renovation strategy, and depreciation model gain early liquidity.
Especially in the current market environment, it is therefore worthwhile not to make decisions based on gut feeling, but on the basis of clear and robust figures.
Now plan for 2026: We analyse depreciation potential, cash flow and strategy – clearly and practically.
Arrange an initial consultation now.
