Depreciation

What is Depreciation?

When you spend money on your self-employment, you can usually deduct these costs as business expenses from your taxes to reduce your profit and thus lower your tax burden.

For purchases worth more than 800€ net, you generally cannot deduct the full costs directly from taxes. You must depreciate the acquired assets, meaning you deduct their acquisition costs spread over their useful life. How long this takes is regulated by the Federal Ministry of Finance in so-called depreciation tables (AfA tables – Absetzung für Abnutzung). This ensures costs are distributed realistically and you keep track.

For purchases up to 952€ gross or 800€ net (so-called low-value assets, GWG), immediate depreciation – i.e., tax deduction in one year – is possible.

Since 2021, this also applies to computers and computer accessories, tablets, and software. Due to rapid technological development, you can opt for immediate depreciation even for costs over 800€.

Types of Depreciation

• Lineare Abschreibung (straight-line depreciation): equal amount per year (standard case)
• Degressive Abschreibung (declining balance depreciation): higher amount at the beginning, decreasing over time

Sonderabschreibung: additional Tax Benefits for small Businesses Source

In addition to regular, even depreciation, there are so-called Sonderabschreibungen (special depreciations). They are designed to support small and medium-sized businesses that want to invest. This allows you to deduct up to 20% of acquisition costs in addition to regular depreciation – thus reducing your tax burden more significantly in the early years.

There are a few requirements:

• Typically available to self-employed individuals, freelancers, and smaller businesses whose profit does not exceed 200,000€ in the year of acquisition (§ 7g EStG).
• The acquisitions must be new, depreciable, and movable (e.g., not real estate).
• The acquisitions must be used at least 90% for business purposes.

Sonderabschreibungen are often used together with the Investitionsabzugsbetrag (IAB — investment allowance) – when you plan to acquire larger work equipment in the future.

Practical Examples

• Office chair for 450€ net → deductible immediately as a low-value asset in the year of acquisition
• System camera for 7,499€ → depreciation (straight-line or declining) over 7 years (according to the Federal Ministry of Finance depreciation table)
• Laptop for 1,989€ → you have the choice: immediate depreciation (deductible in the year of acquisition) OR depreciation (straight-line or declining) over 3 years (according to the Federal Ministry of Finance depreciation table)

Depreciation Tables

In the depreciation tables you can find the intended useful life of your assets – the period over which you should or may depreciate items.

On the Federal Ministry of Finance website you can find complete lists. Here are the most common use cases prepared for you, so you don't have to search as long:

How Depreciation appears in your Taxes

• In the Einnahmen-Überschuss-Rechnung (EÜR — simplified profit calculation)
• Documented via the asset register
• Recorded in ELSTER or accounting software

In the EÜR, depreciation reduces your profit and therefore your tax bill. The asset register is a mandatory list of all depreciable assets — with purchase date, cost, and remaining book value. Both are submitted via ELSTER or calculated and sent automatically by your accounting software.

Common Mistakes & Tips

• Wrong useful life
• Privately used devices fully deducted
• Low-value asset limit overlooked
• No asset register maintained

The most common pitfalls: applying the wrong useful life means deducting costs too early or too late. Privately used devices may only be partially deducted. The low-value asset limit (€800 net) is often overlooked — but it allows you to write off the full cost immediately. And without an asset register, you lack the proof the tax office requires.