Depreciation (AfA)

Depreciation (Abschreibung, AfA = Absetzung für Abnutzung, "deduction for wear and tear") means claiming the purchase cost of an asset as a business expense spread over its useful life for tax purposes in Germany.

Basic principle:

A company car costing €60,000 is not deducted in full in the year of purchase but spread over its useful life (6 years): €10,000 per year.

Important depreciation methods:

1. Straight-line depreciation (standard):

• Evenly over the useful life
• €60,000 ÷ 6 years = €10,000/year

2. Declining-balance depreciation (reintroduced in 2023):

• Higher depreciation in the first years
• Currently max. twice the straight-line rate, at most 20%
• Applies to movable assets (machines, vehicles)

Important useful lives (depreciation table):

• Computer/laptop: 1 year (immediate write-off since 2021!)
• Smartphone: 5 years
• Office furniture: 13 years
• Car: 6 years
• Residential buildings: 50 years (2% straight-line) or 33 years (3% for buildings from 2023)
• Commercial property: 33 years (3%)

Special depreciation §7g EStG:

Small businesses (profit €200,000) can write off an additional 40% in the first year – plus the normal depreciation amount. Extremely advantageous for investments.

For private individuals: landlords also use depreciation. A flat (built 2024, €300,000 building value) brings €9,000/year in depreciation = less tax on rental income.