Herstellungskosten
Costs that create, extend or substantially improve the building — depreciated, not deducted.
Herstellungskosten are costs of building something new, extending it, or improving it substantially beyond its original condition: an added storey, a new balcony, converting an attic into living space, or raising at least three of the four core installations (heating, sanitary, electrics, windows) to a markedly higher standard. Unlike repairs, they are not deducted in the year paid. They are added to the building's depreciation basis and written off with AfA over the remaining useful life. The distinction from Erhaltungsaufwand is the most disputed area of rental tax, and the amounts are often large. Describe the work precisely on the invoices; "renovation" alone does not tell the Finanzamt whether you repaired or improved.
Last reviewed: by Yann Lephay.