Tax · 8 min read
Depreciation in Germany 2025–2027: Using the 30 % Declining-Balance AfA Correctly
When a German business buys a machine, a company car or office furniture, it usually cannot deduct the cost as an expense straight away. The cost is spread over the asset's useful life instead: Absetzung für Abnutzung, or AfA. For purchases between 1 July 2025 and 31 December 2027, the law once again allows a considerably faster declining-balance method. That shifts tax into the future and protects cash flow, especially in the first years.
This guide explains the rules based on sections 6 and 7 of the Income Tax Act (EStG) and the Federal Ministry of Finance letter on the useful life of computer hardware and software. Status: October 2026. Whether a particular asset qualifies is best confirmed with your tax adviser.
Straight-line AfA: the standard case
Under section 7(1) EStG, the acquisition cost is spread evenly over the asset's normal useful life. The useful life comes from the official AfA tables; they set, for example, six years for a passenger car and thirteen years for office furniture. If you can reclaim input VAT, the net cost is what counts.
In the year of purchase, depreciation is pro rata: the annual amount is reduced by one twelfth for each full month before the month of purchase. A machine bought in September therefore earns four twelfths of the annual AfA in the first year. The remainder is written off in an extra year at the end.
Declining-balance AfA of up to 30 %
For movable fixed assets acquired or produced after 30 June 2025 and before 1 January 2028, section 7(2) EStG allows depreciation in decreasing annual amounts. A fixed percentage of the remaining book value is written off each year. The rate may be at most three times the straight-line rate and must not exceed 30 %. The pro rata rule applies in the first year here too.
Because the percentage is applied to an ever smaller book value, the amounts shrink year by year. At some point, spreading the remaining value evenly over the remaining life gives a higher amount. Switching from declining balance to straight-line is allowed under section 7(3) EStG; switching the other way is not. Anyone using declining balance may also not claim extraordinary depreciation for unusual wear.
Purchases outside this window were subject to different rates or none at all, and older assets continue with the method chosen at the time. For electric vehicles bought in the same period, section 7(2a) EStG provides its own, even faster schedule, starting with 75 % in the year of purchase.
- Window: purchases from 1 July 2025 to 31 December 2027
- At most three times the straight-line rate, capped at 30 %
- Only movable fixed assets
- Switching to straight-line is allowed, switching back is not
Worked example: a €30,000 machine
A machine costs €30,000 net, its useful life is eight years, and it is bought in September 2026. Straight-line gives €3,750 a year; in the first year that is four twelfths, or €1,250. The straight-line rate is 12.5 %; three times that would be 37.5 %, capped at 30 %.
Declining balance gives 30 % of €30,000 for four months in the first year, which is €3,000. The second year adds 30 % of the remaining €27,000, or €8,100, and the third €5,670. Over the first three years, €16,770 is written off instead of €8,750 with straight-line. In the sixth year, spreading the remaining value evenly gives the higher amount and the schedule switches. In total, exactly the same amount is written off either way; declining balance simply brings the tax benefit forward.
That timing effect is worth real money for a growing business: a lower tax bill now leaves cash available for the next investment, while the later years carry smaller write-offs when the business may be in a stronger position.
Low-value assets, the pool method and computers
Under section 6(2) EStG, low-value assets (geringwertige Wirtschaftsgüter, GWG) may be deducted in full in the year of purchase if they can be used independently and cost no more than €800 excluding VAT. For items above €250 a register must be kept unless the details are visible from the accounts. An item that, by its business purpose, can only be used together with other technically matched assets does not count as independently usable.
Alternatively, assets above €250 and up to €1,000 can be placed in a pool that is released over five years at one fifth each year, under section 6(2a) EStG. The choice must be applied uniformly to all such assets acquired in a financial year, and anyone choosing the pool may only expense items up to €250 immediately in that year.
For computer hardware and software, the tax authorities accept a useful life of one year under the Federal Ministry of Finance letter of 22 February 2022. Laptops, desktop computers and peripherals can therefore be written off in full in the year of purchase, regardless of price.
Calculating the depreciation schedule
In Toolula's Depreciation Calculator, choose the asset from the presets or a custom useful life, enter the net acquisition cost and the month and year of purchase, and choose straight-line or declining balance. The calculator applies the legal cap for the date you enter: for purchases from July 2025 to the end of 2027, three times the straight-line rate and at most 30 %. If declining balance is not allowed for that date, it calculates straight-line.
The schedule shows the opening value, depreciation, cumulative amount and closing book value for every year, and names the year in which declining balance switches to straight-line. If the cost is €800 net or less, the calculator shows the asset as a GWG with immediate write-off. You can export the schedule as CSV for your bookkeeping.
Not covered are the pool method, the special rule for electric vehicles, and special depreciation under section 7g EStG, which gives small businesses with a profit of up to €200,000 up to 40 % on top. Discuss those cases with your tax adviser.
Frequently asked questions
Which purchases qualify for the 30 % declining-balance AfA?
Movable fixed assets acquired or produced after 30 June 2025 and before 1 January 2028. The rate is at most three times the straight-line rate and no more than 30 % of the remaining book value.
Is declining balance always worth it?
It gives higher write-offs and a lower tax bill in the early years, but the total written off is the same. It makes most sense when profit is high now or you need cash. If you expect much higher profits later, straight-line can be the better choice.
Up to what amount can I write off immediately?
Low-value assets up to €800 net, provided they can be used independently. Computer hardware and software can be written off with a one-year useful life regardless of price, under the BMF letter of 22 February 2022.
How is the year of purchase handled?
Pro rata: one twelfth is dropped for each full month before the month of purchase. A purchase in September therefore counts four months. This applies to both straight-line and declining balance.
Can I switch from straight-line to declining balance later?
No. Section 7(3) EStG only allows switching from declining balance to straight-line. The decision for declining balance is made in the year of purchase.