⚡ In brief: §35c EStG allows you to deduct 20% of energy renovation costs directly from your tax liability — spread over three years, up to 40,000 euros per property. The alternative to classic BEG subsidies.
The Alternative to Subsidies
When planning an energy renovation, most people think of BEG subsidies: BAFA grants, KfW loans, heating replacement bonuses. But there's a second option many homeowners don't know about: tax deduction under §35c of the Income Tax Act (EStG).
The key point: you must choose. For the same measure, you can either receive a BEG subsidy or use the tax deduction — but never both. This either/or decision is irrevocable.
Important: If you've already applied for and received a BEG subsidy for a measure, you cannot additionally deduct the same measure from your taxes. The reverse also applies.
How §35c EStG Works
The mechanism differs from BEG subsidies. Under §35c, no grant is paid out — instead, your tax liability is directly reduced. This is a crucial distinction:
20% of renovation costs are deducted directly from your tax liability — not from your taxable income. This means: the reduction works euro for euro.
Spread Over 3 Years
Year 1: 7% of costs — Year 2: 7% of costs — Year 3: 6% of costs. Together, that's a 20% tax reduction.
Maximum Amount
40.000 €A maximum of 40,000 euros in tax reduction can be claimed per property. This corresponds to eligible costs of up to 200,000 euros.
Building Age
10+ yearsThe building must be at least ten years old at the start of the measure. The building permit or building notification date is decisive.
Owner-Occupied Only
The tax reduction applies exclusively to owner-occupied residential buildings. Landlords and investors cannot use §35c — different depreciation options apply to them.
Which Measures Are Deductible?
The deductible measures essentially correspond to the individual measures under BEG funding. The tax office recognizes the following energy renovation measures:
Thermal insulation of walls, roof, and floor ceilings
Replacement of windows and exterior doors
Replacement or installation of a ventilation system
Replacement of the heating system (e.g. heat pump, biomass)
Installation of digital systems for consumption optimization
Optimization of existing heating systems (hydraulic balancing, pump replacement)
Especially attractive: Energy consulting costs are even 50% deductible — not just 20%. This applies to the creation of an individual renovation roadmap (iSFP) or the technical planning and construction supervision by an energy consultant.
Calculation Example: Insulation for 30,000 euros
A homeowner has the facade of their single-family house (built 1985) insulated for 30,000 euros. They choose the tax deduction under §35c:
Year 1 (Tax Return)
2.100 €7% of 30,000 euros = 2,100 euros less tax
Year 2 (Tax Return)
2.100 €7% of 30,000 euros = 2,100 euros less tax
Year 3 (Tax Return)
1.800 €6% of 30,000 euros = 1,800 euros less tax
Total Savings
6.000 €20% of 30,000 euros = 6,000 euros tax reduction over three years.
For comparison — BEG subsidy: Through BEG, the same homeowner would have received 15% base subsidy + 5% iSFP bonus = also 6,000 euros. However, as an immediate grant, not spread over three years. But the BEG application must be submitted before the work begins.
§35c vs. BEG Subsidy: Which Is More Worthwhile?
The decision depends on your individual situation. Here's an overview of the key differences:
| Criterion | §35c EStG | BEG Subsidy |
|---|---|---|
| Funding rate | Always 20% | 15–70% (depending on measure) |
| Payout | Spread over 3 years | Immediately after completion |
| Application needed? | No, just tax return | Yes, before starting work |
| Deadlines | None (just tax return) | Strict application deadlines |
| Complexity | Simple | Medium to high |
| Maximum | 40.000 € / Objekt | Varies by program |
BEG is better for:
- +Heating replacement (up to 70% funding)
- +Immediate payout desired
- +Higher funding rates possible (e.g. with income bonus)
§35c is better for:
- +No application submitted before starting work
- +Simpler process desired
- +BEG application was rejected
- +No deadlines to meet
Requirements and Common Mistakes
For the tax office to recognize the tax reduction, certain conditions must be met:
Hire a certified contractor
The work must be carried out by a certified contractor. DIY work is not deductible — not even partially.
Contractor's certificate
The contractor must issue a certificate according to the officially prescribed form after completing the work. Without this certificate, no tax deduction.
No combination with BEG
BEG subsidies and §35c cannot be used simultaneously for the same measure. However, different measures on the same building can be funded differently.
No DIY work deductible
Only material and labor costs from a certified contractor count. If you help out yourself, those hours cannot be claimed.
Common mistake: Many homeowners forget the contractor's certificate or receive an incomplete one. Make sure your contractor knows the official §35c EStG form and fills it out correctly.
Our Tip: Check First, Then Decide
The decision between BEG subsidies and tax deduction is not trivial — and it's irrevocable. That's why we recommend: get advice before starting any work.
In our energy consultation, we calculate both options for your specific project and recommend the more economical path. We consider your tax situation, planned measures, and current subsidy rates.
Good to know: Different measures on the same building can be financed differently. For example: heating replacement via BEG (up to 70% subsidy) and facade insulation via §35c (20% tax reduction). This way you maximize your savings.
Note: Tax regulations are subject to change. The information provided here reflects the status as of July 2026. For your individual tax situation, we recommend consulting a tax advisor. This article does not constitute tax or legally binding advice.
Subsidy or Tax Deduction — What's Better for You?
We calculate both options for your project and recommend the more economical path.