The desire to own your own home remains strong for many people—whether driven by a need for security, independence, or the goal of building wealth. Condominiums are especially popular: compact, affordable (compared to detached houses), and ideal as both an investment and retirement provision. Beyond the emotional and economic motivations, there’s another key aspect that should factor into the purchase decision: tax advantages.

The government supports the purchase and ownership of real estate through a variety of tax incentives. Those who stay informed can save taxes when buying, using, and even selling a property—sometimes significantly. In this article, we take a current look at the applicable regulations and highlight how the new federal government is setting new priorities starting in 2025.

Owner-Occupied Condominiums – Benefits You Should Know

If you live in your condominium, you can’t claim traditional depreciation, as this is reserved for landlords. However, there are still tax relief options and government support for owner-occupiers.

Many federal states and municipalities offer subsidized loans or grants to promote homeownership, especially for families with children or middle-income households. These programs vary by region, so it’s worth checking with your state development banks or housing agencies.

For example, the state of Hesse has introduced a new “Hessengeld” program that provides grants for first-time buyers of owner-occupied homes. The grant offers up to €10,000 for individuals, €20,000 for couples, and an additional €5,000 per child under 18. Other states are planning similar programs.

Another benefit is the so-called saver’s allowance: capital gains such as interest or dividends can be earned tax-free up to €1,000 per person per year (€2,000 for couples), encouraging people to save for a down payment.

Also noteworthy is the now-expired “Baukindergeld” (child construction grant), which provided €1,200 per child per year to families who purchased an owner-occupied property before 2021. While similar new programs have not yet been implemented, the 2025 coalition agreement outlines plans for renewed homeownership support initiatives—more on this below.

Tax Benefits for Rental Properties – Investing in Condominiums

Tax benefits are significantly greater for those who rent out their condominium rather than live in it. This approach is especially attractive from a tax perspective.

The key instrument is depreciation (AfA – “Absetzung für Abnutzung”). You can write off 2% of the building’s acquisition costs (excluding land) annually for 50 years. For buildings constructed before 1925, the rate increases to 2.5%. New buildings may also qualify for additional special depreciation (e.g., under § 7b of the German Income Tax Act).

In addition, all ongoing rental-related costs can be deducted as business expenses, including mortgage interest, realtor commissions, notary and land registry fees, travel expenses, maintenance, and tax consulting fees.

A major benefit: in the initial years, expenses often exceed rental income. These losses can be offset against other income, such as salary or self-employment, resulting in direct tax savings.

Making Use of Ancillary Purchase Costs

Ancillary costs often go underestimated but offer tax advantages—though only for rental properties. Notary fees, land registry charges, realtor fees, and mortgage brokerage costs can all be claimed as deductible expenses. For owner-occupiers, however, these costs are considered private and are not tax-deductible.

Tax-Free Property Sales – A Long-Term Advantage

Another highly attractive tax benefit applies when selling a property. If you hold a rented condominium for at least ten years, you can sell it without paying capital gains tax. This so-called speculation period (§ 23 EStG) applies to private property sales.

For owner-occupied homes, the rule is even more generous: the profit is tax-free if the property was used exclusively by the owner in the year of sale and the two preceding years. Given today’s rising property values, this can be a major financial advantage.

What’s New in the 2025 Coalition Agreement?

The new government formed by CDU/CSU and SPD introduced a coalition agreement in spring 2025 that also affects real estate buyers.

Support for Family Homeownership: New programs are planned to provide repayment grants, subsidized interest rates, and government guarantees to lower the equity barrier—available for both houses and condominiums. These programs are currently in development and expected to launch later in 2025.

Energy-Efficient Renovations of Inherited Properties: Tax relief is also being considered for the energy-efficient renovation of inherited properties, including condominiums. The goal is to prevent demolition or distress sales and support sustainable modernization of older buildings.

Property Tax Reform (Effective 2025): The reformed property tax system took effect in 2025 and applies to condominiums. The amount owed depends on the unit’s location, the new assessed value, and municipal tax rates. Owners should factor this into ongoing cost planning.

While the government’s current tax focus is more business-oriented (e.g., upcoming depreciation changes and a phased corporate tax reduction starting in 2028), the coalition agreement clearly keeps private real estate ownership on the agenda.

Conclusion: Smart Planning Brings Tax Benefits

Whether for personal use or as an investment, buying a condominium offers multiple advantages—including tax incentives. Rental properties benefit from depreciation, deductible expenses, and long-term tax-free gains. But owner-occupiers can also save through regional subsidies, new federal programs, and tax-free investment earnings.

With the 2025 coalition agreement, it’s clear that the government aims to further promote homeownership—particularly for families. The property tax reform and planned renovation incentives also play key roles. To make the most of these opportunities, it’s wise to seek early tax advice and stay alert to new legislative developments.