Deducting an energy retrofit from your income tax
If you renovate a home you live in yourself, you can deduct 20 percent of the cost from your income tax over three years instead of applying for a grant.
The tax bonus as an alternative to grant funding
§ 35c of the German Income Tax Act (Einkommensteuergesetz) is the quiet alternative to funding: instead of filing an application with the BAFA or the KfW, you claim the cost in your tax return. Twenty percent of the expenditure is eligible, spread over three years — 7 percent in the year of completion and in the following year, 6 percent in the third year. The maximum tax reduction is 40,000 euros per property, corresponding to eligible expenditure of 200,000 euros. The route is deliberately lean: no application before work starts, no mandatory energy consultant, no statement of use for an authority. In return it applies only to owner-occupied residential property, and no money is paid out — the reduction only works if you actually owe income tax. For one and the same measure you may not also draw BEG funding; you choose one route per renovation step. The decisive document is the Fachunternehmerbescheinigung, the specialist company's certificate, which we issue.
Who the tax bonus suits
The bonus pays off for owners who live in their house or flat themselves and who owe enough income tax for the reduction to actually take effect. Rented-out properties are excluded — there renovation costs are treated as income-related expenses anyway. The route also becomes interesting for larger projects: eligible expenditure runs up to 200,000 euros per property, whereas BAFA grant funding is capped per residential unit and calendar year. And it fits when the works are due at short notice and there is no time left for an application procedure before construction starts.
Which of our works are covered
From our range of services it is above all the insulation work that qualifies: thermal insulation of roof surfaces, insulation of the top-floor ceiling and insulation of external walls — whether as a prefabricated timber frame layer in front of the wall, as an added build-up or as internal insulation with drywall. Measures for summer heat protection are part of the catalogue too. Windows and front doors are also named in the law, but they are not a service of our company, and heating technology is not one of our trades. Whether a specific item qualifies follows from the ordinance and from your tax adviser's assessment.
Requirements at a glance
Only residential property you own and occupy yourself in the year of the measure qualifies. Rented out or commercially used properties are excluded.
At the start of the energy measure the building must be more than ten years old; what counts is the date construction of the building began.
The measure must be listed in the ordinance on energy retrofit measures (ESanMV) and meet its technical minimum requirements.
The work must be carried out by a specialist company, which then issues the certificate according to the officially prescribed template.
The invoice must be in German and itemise the work; payment must be made by bank transfer to the company's account — cash payment forfeits the relief.
No double funding: if a BEG grant, a subsidised loan or § 35a has been used for the same measure, the tax bonus does not apply.
The process in five steps
Clarify whether it works for you
Beforehand your tax adviser checks whether property, use and building age fit and whether your tax burden is high enough for the relief to arrive over three years. This is a question we cannot answer for you.
Plan the build-up and quotation
We survey the component and plan the build-up so that the technical minimum requirements of the ordinance are met. Insulation material, thickness and build-up appear in the quotation and later in the certificate.
Carrying out the construction work
We carry out the insulation work and document the materials installed. Unlike the BEG route no application is needed before work begins — the requirements on execution are binding nonetheless.
Invoice and certificate
You receive the invoice in German and the specialist company's certificate on the official template. Payment is made by bank transfer to our business account; paying cash would cost you the tax relief.
Claiming it in your tax return
Using the Anlage Energetische Maßnahmen form you claim the cost across three consecutive assessment periods: 7 percent in the year of completion, 7 percent in the following year and 6 percent in the third year.
Insulating in timber — easy to document
For the tax bonus it matters not only that insulation was installed but with what material and to what thickness. In timber construction this is easy to evidence: the insulation sits in a defined way between rafters or studs, material and thickness are fixed, and the build-up can be described layer by layer. That simplifies the certificate and any later query from the tax office. Technically the same rules apply as on any other route: the build-up needs a planned airtightness and vapour control layer, must be tighter inside than outside and must be properly connected at eaves, verge and penetrations. Insulation without sound moisture protection does not improve because of a tax advantage.
Services we carry out for this
We carry out the construction work. Evidence and applications go through independent experts.
Our role — and the line towards tax advice
We are the executing specialist company. In practice that means: we plan the component build-up according to the technical requirements, carry out the work, document material and insulation thickness, issue a verifiable invoice in German and the certificate on the officially prescribed template. What we do not provide is the tax assessment. Whether the tax bonus works out better than grant funding in your case, how it affects your assessment and which items are recognised is something to clarify with your tax adviser or the tax office.
Source: § 35c EStG, ESanMVFrequently asked questions about funding
What is the Fachunternehmerbescheinigung and who issues it?
It is a certificate on an officially prescribed template in which the executing specialist company confirms which energy measure was carried out and that the technical minimum requirements are met. Without it the tax office will not recognise the cost. We issue it together with the invoice once the works are complete.
Can I combine the tax bonus with a BAFA grant?
Not for one and the same measure. For each renovation step you choose either grant funding or the tax reduction. Where several separate measures are involved, different treatment is conceivable — but define the boundaries with your tax adviser before awarding the contract.
Is the new roof covering deductible as well?
What qualifies is the energy measure itself. Work directly connected to it, without which the insulation could not be installed, is generally included. A pure re-covering of the roof without improving thermal performance, by contrast, is not an eligible measure. Assessing an individual case is a matter for your tax adviser.
By when does the measure have to be completed?
The rule is time-limited: eligible measures are those begun after 31 December 2019 and completed before 1 January 2030. What counts is the completion of the measure, not the start of construction. Anyone planning a larger renovation in stages should keep that end date in mind from the outset.
Carry out your retrofit with the tax bonus
Tell us which component is to be insulated. We plan the build-up in line with the technical requirements and issue the invoice and the specialist company's certificate on completion.
Status: July 2026. Information on § 35c EStG without guarantee and without constituting tax advice — the statute, the ordinance and your tax adviser or tax office are what count.
All information on funding programmes is provided to the best of our knowledge, without guarantee and without any claim to completeness. It does not replace legal, tax or energy consulting. Terms and budgets change constantly; only KfW, BAFA, NBank and the responsible funding bodies are binding. Applications must generally be filed before work begins.