Investitionsabzugsbetrag: Steuern sparen vor der Anschaffung

Planning a bigger purchase for 2027 or 2028, such as a van, a machine or new IT? You don't have to wait for the invoice to save tax. Under § 7g EStG you can deduct up to 50 percent of the planned cost from your profit today (Investitionsabzugsbetrag, "investment deduction"). Right before year-end it is worth a look: we explain who can use it, how add-back and special depreciation work together, and which deadlines you need to watch.

What is the investment deduction?

The investment deduction (IAB) is a kind of tax advance. For a movable, depreciable fixed asset you will acquire or produce in the future, you may deduct up to 50 percent of the expected acquisition or production costs from your profit, in the year you plan it. The rule is in § 7g (1) EStG.

The effect is a liquidity and interest advantage: your profit, and therefore your income tax, falls in the deduction year even though you haven't spent a cent on the purchase. The money stays in the business for the later investment.

Important: the IAB is not an extra business expense, only a shift in timing. In the year of purchase it is added back to profit, and in return the depreciation base is reduced. In the end you don't save tax permanently, you postpone it.

Who can use it?

The IAB is open to businesses of any legal form that determine profit under § 4 or § 5 EStG, i.e. via cash-basis profit calculation (EÜR) or balance sheet. The requirements at a glance:

• Profit limit: Your profit in the deduction year must not exceed EUR 200,000. The profit is measured without the investment deductions and add-backs. The limit applies equally to EÜR filers and balance-sheet filers.
• Cap: Deductions per business, in the deduction year and the three prior years combined, must not exceed EUR 200,000.
• Eligible asset: A depreciable movable fixed asset. New and used assets qualify. Land and buildings do not.
• Use: Until the end of the financial year after the purchase, the asset must be used or rented out exclusively or almost exclusively for business. In practice, at least 90 percent business use is considered sufficient.
• Electronic filing: The deduction totals must be transmitted electronically in the prescribed format, normally together with your tax return.

Since the reform of § 7g EStG you no longer have to submit a detailed functional description of the planned investment. You should still document your intention internally, for instance with a quote or a short planning note. The tax office can ask for proof.

How the deduction works in practice

An example: you run a trades business and plan to buy a van for EUR 40,000 net in mid-2027. Your 2026 profit is EUR 120,000, below the limit.

1. 2026: Outside your bookkeeping you deduct 50 percent of EUR 40,000, i.e. EUR 20,000. Your taxable profit falls to EUR 100,000.
2. 2027: You buy the van. You may now add back up to 50 percent of the actual cost to profit, but no more than the EUR 20,000 still open. At the same time you reduce the acquisition cost used for depreciation by the same amount.

With an EÜR this runs alongside the regular profit calculation: you enter deduction and add-back in the EÜR annex; they don't change your business income and expenses. Balance-sheet filers record both off-balance-sheet.

Deadlines and reversal

You have time for the investment: the asset must be acquired or produced by the end of the third financial year after the deduction year. If you form an IAB in 2026, you have until 31 December 2029.

If it doesn't work out, the deduction is reversed retroactively (§ 7g (3) EStG). The tax office then amends the assessment of the deduction year, even if it was already final. The same applies if you do not use or rent out the asset for business until the end of the following year (§ 7g (4) EStG). A reversal can lead to interest on back taxes. So only plan an IAB for investments you will realistically make.

Tip: If the actual investment is lower than planned, only the part matching the actual cost is added back. The unused remainder is reversed. Better to plan cautiously than too high.

Special depreciation: the second lever

The IAB works before the purchase, the special depreciation under § 7g (5) EStG after it. On top of regular depreciation you can deduct a further total of up to 40 percent of the acquisition or production cost in the year of purchase and the four following years. You decide how to spread the 40 percent over the five years.

The conditions differ from the IAB:

• Your profit in the financial year before the purchase must not have exceeded EUR 200,000.
• The asset must be used or rented out exclusively or almost exclusively for business in the year of purchase and the following year.

Special depreciation and declining-balance depreciation can be combined, because the special depreciation applies expressly alongside depreciation under § 7 (1) or (2) EStG. For the options of declining-balance depreciation, see our article on the investment booster.

When the IAB pays off, and when it doesn't

The IAB is particularly worthwhile when your profit is high this year and you know you will invest within three years. You then shift tax and strengthen liquidity. It is less useful if you expect much higher income later, because the add-back then falls in a year with a potentially higher tax rate. Also check whether your profit exceeds the EUR 200,000 limit by a small margin, since that rules out the deduction.

A typical stumbling block is private use. A company car you also use privately often doesn't reach the required business use. For vehicles, clarify this with your tax advisor beforehand.

Year-end checklist

• Which purchases are planned for 2027 to 2029? Collect quotes.
• Project your 2026 profit: is it below EUR 200,000?
• Check the business-use share of the planned assets, at least 90 percent.
• Keep an eye on IABs formed in 2023 to 2025: when does the three-year period end?
• Transmit the deduction electronically with your 2026 tax return.

With clean bookkeeping and clear investment planning, the IAB gives you liquidity back that you would otherwise see years later. We are happy to support you with planning and with entering it in your tax return.

Frequently asked questions

Do I have to form the investment deduction by 31 December?

No. The deduction relates to the financial year, not to a cut-off date in the current year. You enter it in the tax return for that year. What matters is that your intention to invest already existed in the deduction year.

Does the IAB apply to small-business owners (Kleinunternehmer)?

Yes, provided profit is determined under § 4 or § 5 EStG and the other requirements are met. Note that small-business owners cannot deduct input VAT, so the acquisition cost includes the VAT.