The income tax exemption of § 3 no. 72 EStG: limits, buildings and consequences

In March 2025 the Wagner family had a 9.8 kWp solar installation put on their detached house, and in its first year they received 640 € in feed-in payments. An acquaintance advises them to file a profit calculation, depreciate the installation and set the resulting loss against their salary. Not one of these three suggestions fits the law that has applied to such installations for some years now.

What the exemption covers: receipts and withdrawals

The list in § 3 EStG opens with the words “the following are tax-free”, and its number 72 names the receipts and withdrawals connected with operating certain photovoltaic installations. The provision therefore does not exempt the installation as an object, but the inflows and benefits that its operation produces.

Receipts mainly means what the grid operator pays for the electricity fed into the grid. A price that a tenant or neighbour pays for electricity delivered to them is covered as well. What matters is only the connection with running the installation, not who ends up using the electricity.

The withdrawals deserve a closer look. Anyone who consumes self-generated electricity in their own household withdraws it from the activity for private purposes. In a business activity such a withdrawal would in principle be recorded like a receipt; number 72 expressly makes it tax-free too.

No value therefore has to be set for self-consumption as long as the exemption applies. That removes a valuation question which would otherwise have to be answered again every year: at what amount each self-consumed kilowatt hour should be recorded.

The wording provides for no application and no option either. If the conditions are met, the receipts are tax-free by operation of law. Someone who would prefer to declare a loss cannot opt out of the exemption; the section on § 3c shows why that wish would come to nothing anyway.

Linking the rule to the register has a practical reason. The tax office does not need to carry out any technical check, and the operator can prove the size of the installation at any time. Conversely, a wrong or outdated entry has a direct effect on tax, and an extension should be recorded there as well.

Two output limits: per unit and per taxpayer

Number 72 sets two limits that must both be respected. The installed gross output may be up to 30 kilowatts peak per residential or commercial unit, and in total it may reach no more than 100 kilowatts peak per taxpayer or co-entrepreneurship. Both values apply in the version that the section on application places in time.

The first limit grows with the building. A detached house with a single dwelling carries up to 30 kWp within the exemption. A house with three flats and a shop on the ground floor counts four units, so up to 120 kWp. What matters is how many residential and commercial units the building has, not who owns them.

The second limit, by contrast, adds up all installations of the same taxpayer. Someone who runs installations on their own house, on a rented block of flats and on a barn adds their output together. For a partnership, the limit applies to the co-entrepreneurship as such.

Both limits are drafted as a condition: the receipts are tax-free “if” the output does not exceed the values. The wording knows no tax-free base that a larger installation would keep up to the limit. If one of the two limits is exceeded, the exemption is lost for the installations concerned as a whole, not merely for the excess.

That turns the overall limit into a cliff edge. An operator with 95 kWp who buys a small additional installation of 10 kWp then stands at 105 kWp. He does not lose the exemption for the ten new kilowatts; he no longer meets the condition of number 72 for any of his installations.

According to the wording, the overall limit is measured per taxpayer or co-entrepreneurship, not per household or per family. If spouses run an installation together, the first question is therefore to whom it is attributed; that attribution follows general rules which this course does not cover.

Which installations: on, at or in buildings

Only photovoltaic installations located on, at or in buildings qualify, and the law expressly includes ancillary buildings. The classic rooftop installation is covered, as are modules on a façade or on a balcony railing that forms part of the building, and an installation on a detached garage.

The wording does not cover an installation standing on open ground without any building. Someone who mounts modules on racks in a meadow cannot rely on number 72, however small the installation. The general rules apply to them, as described in the second module for larger installations.

Unlike the VAT provision, number 72 does not ask how the building is used. A residential house, an office building, a workshop or an agricultural shed all come into consideration equally. Use only matters indirectly, because it determines whether a unit counts as residential or as commercial.

Ownership of the building does not matter either. Someone who leases the roof of another person's house and runs an installation there is subject to the same limits, measured by the units of that building. What remains decisive is that the installation is located on, at or in a building.

• Rooftop installation on your own home: covered if both limits are met
• Installation on a garage, shed or other ancillary building: expressly included
• Installation on the roof of a workshop or office building: covered, measured by the commercial units
• Ground-mounted installation without a building: not covered by the wording

Which version applies since when

The application rules are not in § 3 but in § 52(4) EStG, and there are two of them. The first version of number 72, inserted by the Act of 16 December 2022, applies to receipts and withdrawals earned or made after 31 December 2021.

The second rule concerns the version amended by the Act of 2 December 2024. It applies for the first time to photovoltaic installations acquired, put into operation or extended after 31 December 2024. The limits named in this module are those of this later version, as read on 23 September 2026.

For an installation acquired and put into operation before 2025 and not extended since, the 2022 version therefore continues to apply. Its wording is no longer printed in the current text of the Act. This course does not reproduce its limits; anyone assessing such an older installation has to consult the 2022 wording.

Extension is the keyword that brings older installations into the new version. Someone who puts additional modules in 2026 on a roof whose installation dates from 2020 extends it after 31 December 2024. The later version, including its limits, then applies to the extended installation.

The cut-off dates also reach back into the assessment years. Receipts from 2021 or earlier fall under neither version; the general rules remain in force for them. Someone who still has open assessments for those years cannot rely on the exemption.

No profit calculation, no contamination

Running an installation that feeds electricity into the grid for payment can be a business activity within the meaning of § 15(2): an independent, sustained activity carried on with a profit motive and taking part in general economic dealings. Without the exemption, the surpluses would then be business income.

Sentence 2 of number 72 draws an express consequence from this. If business income is earned and the receipts from this activity are tax-free in their entirety, no profit is to be calculated. The activity thus disappears from the income calculation instead of sitting there with a profit of zero.

The words “in their entirety” deserve attention. The relief only applies if all receipts of the activity are exempt. If someone sells electricity from a qualifying installation and also from a non-qualifying ground-mounted one, the obligation to calculate a profit for the activity remains.

Sentence 3 closes a second trap. Under § 15(3) no. 1, the activity of a partnership counts entirely as a business if it also carries on a business activity. A letting partnership running an installation on its rented building would thereby become commercial as a whole, rental income included.

For the cases in sentence 2, sentence 3 declares this contamination rule inapplicable. The civil-law partnership that lets a house and runs a qualifying installation on it keeps its income from letting and leasing. For letting partnerships, this removes a risk that could make an installation on a rented building expensive in tax terms.

How the rental income of such a partnership is itself treated is described in the course on income from letting and leasing. Here it is enough to note that the qualifying installation does not change that type of income as long as its receipts fall under the exemption in their entirety.

The other side: § 3c and non-deductible costs

Every tax exemption in income tax law has a counterpart. § 3c(1) EStG provides that expenses directly and economically connected with tax-free receipts may not be deducted as business expenses or income-related expenses. Someone who pays no tax on the receipts cannot deduct the related costs either.

For a qualifying installation this means: the purchase price is not depreciated, maintenance, insurance and repairs reduce no income, and interest on a loan used to finance the installation has no tax effect either. All of these are directly connected with the tax-free receipts.

That also answers the advice from the opening. A loss from the installation cannot be set against salary, because for tax purposes it does not arise at all: the receipts are exempt, the expenses barred from deduction, and under sentence 2 a profit is not even to be calculated.

For most small installations this is no disadvantage. Depreciating a rooftop installation over its useful life could produce a small surplus or a loss, and a persistent loss always raises the question of whether there is a profit motive. The exemption takes both out of the calculation in favour of a simple result.

The exclusion only reaches as far as the connection. Costs that relate not to the installation but, for instance, to a let flat in the same building remain deductible. When a roof is renovated partly for the installation, it therefore has to be separated which share of the costs belongs to which activity.