Investitionsabzugsbetrag

How the deduction works

§ 7g EStG allows up to 50% of the expected acquisition cost of a movable business asset to be deducted from taxable profit before the asset is acquired, capped at €200,000 per business. It requires profit of no more than €200,000 in the year of deduction. The acquisition must follow within the next three financial years, the asset must be used at least 90% for business purposes, and it must stay in the business at least until the end of the year after acquisition.

The deduction is therefore a shift rather than a gift. What is deducted now is no longer available for depreciation later: after purchase the deduction is applied against acquisition cost and the depreciable base falls accordingly. The benefit is the time value of the earlier deduction, plus the rate effect of taking it in a high-profit year.

Where it does not apply

Small installations covered by the income tax exemption in § 3 no. 72 EStG are excluded. Where no taxable income arises there is nothing to deduct against. Commercial installations above those thresholds remain eligible.

If the investment does not happen the deduction is unwound retroactively: the assessment for the year of deduction is amended and the back tax carries interest. The deduction therefore belongs in a concrete investment plan, not in speculative tax planning.

How it stacks with depreciation

The deduction is the first stage. After acquisition, the special depreciation under § 7g (5) EStG and ordinary depreciation follow, both on the already reduced base. The sequence determines when the relief arrives, not how much of it there is in total.

Viewed through tax, this deduction is why the date of the investment decision matters economically and not only the date of commissioning. A business with a strong profit year can take the deduction into that year and build the installation two years later.

For project planning that has two consequences. First, the tax timeline belongs inside the project schedule rather than at the end of it: the three-year window is a hard limit and grid connection plus permitting consume a serious share of it. Second, the deduction moves the after-tax return noticeably, but it will not carry a project that does not stand up before tax.

The calculator linked below computes the saving on the personal income tax schedule. Corporations follow a different calculation, and in either case no calculator replaces advice on the specific case.