Renovation Funding 2026: BAFA, KfW, iSFP Bonus and Tax Bonus in Detail
With a renovation, up to 70% of the heating costs can be recovered in 2026. This guide organises the four funding pillars – BAFA grant (BEG EM), KfW 261/159, iSFP bonus and tax bonus under Section 35c EStG – explains the decisive combination rules and shows the right application sequence with which you exhaust the funding maximum without losing the entitlement through a formal error.
Anyone carrying out an energy-efficient modernisation of an existing building in 2026 can recover a substantial share of the costs through grants, low-interest loans and the tax bonus – for a new heating system up to 70 percent of the investment in the best case. The web of BAFA grant (BEG EM), KfW supplementary loan, iSFP bonus and Section 35c of the Income Tax Act (§ 35c EStG) seems confusing at first. This guide sorts the four funding pillars, explains the key combination rules and guides you through the correct order of application, with which you exploit the maximum funding – without forfeiting the entitlement through a procedural error. How costs are currently developing is shown by the prefabricated house prices 2026.
The four funding pillars for renovators in 2026 at a glance
Short answer: In 2026 four programmes support energy-efficient renovation: first, the BAFA grant within the Federal Funding for Efficient Buildings – Individual Measures (Bundesförderung für effiziente Gebäude – Einzelmaßnahmen, BEG EM) for heating, building envelope and building services; second, the KfW loans 261 (efficiency-house renovation including a grant) and 159 (supplementary loan to the BAFA grant); third, the iSFP bonus of 5 percent for measures from an individual renovation roadmap; and fourth, the tax bonus under § 35c EStG as an alternative to direct funding. Note: the grant and the tax bonus are mutually exclusive for one and the same measure – for each trade you decide on one of the two routes.
Funding is broadly divided into two logics: anyone tackling individual measures (only the heating, only the insulation, only the windows) is best served by the BEG EM and the direct BAFA grant. Anyone who brings the whole house up to an efficiency-house level (85, 70, 55 or 40 EE) reaches for the KfW loan 261 with an integrated repayment grant. Both routes can be enhanced via an individual renovation roadmap – more on this in the dedicated guide renovation roadmap (iSFP). For a prefabricated house from the 1970s to 1990s all four pillars apply – the guide modernising a prefabricated house shows which cost blocks are typical.
BAFA grant (BEG EM): for heating, building envelope and building services
Short answer: In 2026 the BEG EM pays staggered grants: for a heating replacement there is a 30 percent basic subsidy, topped up by the climate-speed bonus (Klimageschwindigkeits-Bonus, 20 percent when replacing an old fossil heating system), the income bonus (30 percent for a taxable household income of up to 40,000 euros) and the efficiency bonus (5 percent for certain heat pumps). Taken together, the individual bonuses are capped at a maximum of 70 percent. For measures to the building envelope (insulation, windows) and the building services there is 15 percent, plus a 5 percent iSFP bonus, i.e. a maximum grant of 20 percent.
Responsible for the grants for the envelope, windows, ventilation and building services is the Federal Office for Economic Affairs and Export Control (BAFA), whereas the heating replacement is handled by the KfW (see the following section). This division of responsibility has existed since 2024 and continues unchanged in 2026. Decisive for the size of the saving are the funding rates and the measure-specific ceilings on eligible costs.
BEG EM 2026 — funding rates and the maximum eligible costs per residential unit
| Measure | Basic subsidy | Bonus possible | Max. eligible |
|---|---|---|---|
| Heat pump (heating replacement) | 30 % | + up to 40 % (climate/income/efficiency) | 30,000 € |
| Biomass heating (pellets) | 30 % | + up to 25 % | 30,000 € |
| External wall insulation (WDVS) | 15 % | + 5 % iSFP | 60,000 € |
| Roof / top-floor ceiling insulation | 15 % | + 5 % iSFP | 60,000 € |
| Windows with U_w ≤ 0.95 | 15 % | + 5 % iSFP | 60,000 € |
| Ventilation with heat recovery | 15 % | + 5 % iSFP | 60,000 € |
| Heating optimisation / hydraulic balancing | 15 % | + 5 % iSFP | 60,000 € |
| Energy consultancy / specialist planning | 50 % | — | capped (BEG rates) |
Ceilings: heating and building envelope are calculated separately
For the heating replacement a separate ceiling of 30,000 euros of eligible costs per residential unit applies. For all other individual measures – insulation, windows, ventilation, building services – a further pot of 60,000 euros of eligible costs per residential unit is available. Anyone who presents an individual renovation roadmap raises this ceiling for the envelope from 30,000 to 60,000 euros and thus doubles the eligible amount – a lever that is often underestimated.
KfW 261 and 159: low-interest loan and repayment grant for the renovation
Short answer: The KfW supports renovators in 2026 in two ways: programme 261 (residential buildings – loan) finances the renovation to an efficiency house via a low-interest loan of up to 150,000 euros per residential unit and a repayment grant of 5 to 45 percent, depending on the efficiency-house level achieved. The supplementary loan 358/359 (formerly designated 159) provides up to 120,000 euros per residential unit for measures that already receive a BAFA grant – with an interest reduction for households with an income of up to 90,000 euros. This allows the remaining share after deducting the grant to be financed cheaply with borrowed money.
Anyone who brings their prefabricated house fully up to an efficiency house 70 EE or 55 EE should crunch the numbers on KfW 261: the repayment grant is offset directly against the loan and reduces the sum to be repaid. Anyone who, on the other hand, funds individual measures via the BEG EM but does not want to settle the remaining share from reserves supplements the BAFA grant with the supplementary loan. Both KfW routes run through your house bank, not directly through the KfW.
KfW programmes for renovators in 2026 compared
| Programme | Purpose | Max. loan | Repayment/interest benefit |
|---|---|---|---|
| KfW 261 | Renovation to an efficiency house | 150,000 € / RU | 5–45 % repayment grant |
| KfW 358/359 (supplement) | Supplement to the BAFA grant | 120,000 € / RU | Interest reduction up to 90,000 € income |
| KfW 270 (PV) | Photovoltaics & storage | system costs | pure interest loan |
The iSFP bonus: an extra 5 percent for measures with a renovation roadmap
Short answer: In 2026 the individual renovation roadmap (individueller Sanierungsfahrplan, iSFP) brings a funding bonus of 5 percentage points on all measures to the building envelope and the building services that are recommended in the roadmap and carried out within 15 years. In addition, the iSFP doubles the ceiling on eligible costs for the envelope from 30,000 to 60,000 euros per residential unit. The iSFP is prepared by an energy efficiency expert listed with the BAFA; for a single-family house it costs around 1,300 to 1,800 euros, of which the BAFA covers 50 percent (a maximum of 650 euros).
Once you work the bonus through, the lever becomes visible: at 40,000 euros of insulation costs the iSFP bonus brings 2,000 euros of additional grant – so the roadmap has almost paid for itself. Details on the process, costs and the 15-year window are provided by the guide renovation roadmap (iSFP). Important: the iSFP bonus does not apply to the heating replacement – the bonuses from the heating funding apply there instead.
Renovation including complete funding handling at a fixed price
Several specialist firms from our network calculate your renovation including the BAFA and KfW application through an energy efficiency expert. We put you in touch with three suitable providers – so you know your remaining share after funding before the first contract is awarded.
Tax bonus under § 35c EStG: the route with no application at all
Short answer: Anyone who wants to avoid the effort of applying or cannot use the BEG grants secures the tax bonus under § 35c EStG in 2026: 20 percent of the renovation costs, a maximum of 40,000 euros per property, spread over three years (7 percent, 7 percent, 6 percent). The condition: the owner-occupied residential building is more than ten years old at the start of the measure, a specialist company carries out the work and issues a certificate in the official form. The tax bonus cannot be combined with BEG funding or a low-interest KfW loan for the same measure.
The tax bonus is particularly worthwhile for owners with a high tax burden who are not entitled to the income bonus, or for measures that stay just below the attractive BEG threshold. A worked example: at 50,000 euros of renovation costs, § 35c EStG brings 10,000 euros of tax savings over three years. The BEG EM, on an insulation measure with the iSFP bonus, would deliver only 20 percent, i.e. likewise 10,000 euros – but immediately and effective for cash flow. For the heating, the BEG funding is clearly ahead in almost all cases.
Either-or: no double funding per measure
For one and the same renovation measure you may not claim the BEG grant and the tax bonus at the same time in 2026. What is permitted, however, is a split by trade: the heating via BEG funding (up to 70 percent), the façade insulation via § 35c EStG (20 percent). Before awarding the contract, check for each trade which route yields the higher net benefit – an energy efficiency expert or tax adviser can work this out for your property.
Combination rules: what can be combined – and what cannot
Short answer: In 2026 the rule is: the BAFA grant (BEG EM) and the KfW supplementary loan (358/359) can be combined for the same measure – the grant reduces the costs, the loan finances the rest cheaply. The iSFP bonus is added to the BAFA grant for the envelope. What cannot be combined, on the other hand, are: the BEG grant and the tax bonus (§ 35c) for the same measure, as well as KfW 261 (efficiency house) and BEG EM (individual measure) for the same component. In addition, in many federal states state-level funding can be added, provided the programmes do not prohibit double funding of the same cost item.
How the funding routes can be combined in 2026 (per measure)
| Combination | Allowed? | Note |
|---|---|---|
| BAFA grant + KfW supplementary loan | yes | The classic: grant + cheap loan |
| BAFA grant + iSFP bonus | yes | 5 % extra on the envelope |
| BAFA grant + § 35c EStG | no | Either-or per measure |
| KfW 261 + BEG EM (same component) | no | Efficiency house OR individual measure |
| BEG + state-level funding | mostly yes | Check the programme conditions |
| § 35c EStG + state grant | check | depends on the state programme |
The right order: plan first, then apply, then commission
Short answer: The golden rule in 2026 is: the funding application must be submitted and approved BEFORE the contract is awarded. Anyone who first commissions a tradesperson and only submits the application afterwards forfeits the entire entitlement. The correct sequence: first, energy consultancy and iSFP; second, conclude a supply or services contract with a condition precedent; third, apply to the BAFA (envelope) or the KfW (heating) via the energy efficiency expert; fourth, wait for the approval; fifth, award the contract bindingly and carry it out; sixth, submit the proof of use and receive the grant.
- 1. Commission an energy efficiency expert and – for the 5 % bonus – have an iSFP prepared.
- 2. Obtain quotes and prepare a contract with a condition precedent (funding approval).
- 3. Submit the application: heating via the KfW (through your house bank), envelope/building services via the BAFA.
- 4. Await the approval or grant notice — only commission bindingly afterwards.
- 5. Carry out the measure and collect all invoices and the specialist company's declaration.
- 6. Submit the proof of use with the confirmation after completion (BnD) and receive the grant.
Special case heating: the contract with a condition precedent
Since 2024 you may, for the heating funding, conclude a contract before the application is submitted – provided the contract contains a condition precedent or subsequent condition that ties it to the funding approval. This gives you planning certainty with the tradesperson without jeopardising the funding entitlement. Have the wording confirmed by the specialist company or energy adviser before you sign.
Sample calculation: how much funding a typical renovation brings back
Short answer: An example for an owner-occupied single-family house built in 1985: a heat pump for 30,000 euros (30 % basic subsidy + 20 % climate-speed bonus = 50 % = 15,000 euros grant), façade insulation for 40,000 euros (15 % + 5 % iSFP = 20 % = 8,000 euros), new windows for 20,000 euros (20 % = 4,000 euros). Total costs 90,000 euros, grant 27,000 euros. The remaining share of 63,000 euros is financed by the KfW supplementary loan at a reduced interest rate. The iSFP for around 1,500 euros, reimbursed by half, has more than paid for itself through the bonus.
Important for the calculation: the grant is awarded on the eligible costs up to the respective ceiling, not on every euro of the invoice. If you keep the individual trades below the ceilings (30,000 euros heating, 60,000 euros envelope with iSFP) you exploit the maximum. Anyone still at the beginning is best advised to review the overall strategy with the cost calculator and a look at the complete funding overview. How the renovation fits into the overall building process is shown by the guide the house-building process.
Your remaining share after funding – in black and white
We put you in touch with three specialist firms that calculate your renovation, combine the right funding programmes and submit the applications through an energy efficiency expert. This way you can see, even before the contract is awarded, what remains after all grants have been deducted.
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Compare house prices nowImportant questions briefly explained
The most common price questions around Renovation Funding 2026 – answered concisely by the Prefabricated House editorial team (as of 2026).
