Depreciation on Computers, Software and More: Immediate Write-off Now Possible

Since 1 January 2021, taxpayers have benefited from a far-reaching simplification of the relevant tax provisions.

The legislator is responding to the advance of digitalisation and intends to promote it in a targeted manner. Since 2021 it has permitted the immediate write-off of PCs and other devices as well as software in the year of acquisition.

The previously applicable depreciation rules and exceptions for low-value assets (geringwertige Wirtschaftsgüter, GWG) have consequently become less significant.

The new tax rules allow taxpayers to claim the purchase price of computers, laptops, printers and more as an immediate tax deduction. Employees can declare professionally used hardware and software as employment expenses (Werbungskosten), while businesses deduct the purchase sum as a business expense (Betriebsausgabe) from their income.

This rule applies regardless of the invoice amount.

In addition, the current legislation provides identical depreciation rules for all types of device. Previously, it mattered whether the individual devices could be used independently.

An immediate write-off was only permitted for devices capable of independent use, such as a PC or a printer with a copy function.

A printer that only functions in conjunction with a computer did not fall under this rule. The new tax provisions no longer draw this distinction.

The revised depreciation rules for computers and other hardware and software represent a shortening of the depreciation period. Since 2021 this has been one year; previously the period was three years. This revision to the depreciation schedule (AfA-Tabelle — Absetzung für Abnutzung) in practice creates the possibility of an immediate write-off.

The tax authorities have clarified this in corresponding administrative guidance. If, for example, a sole trader purchased a new computer on 15 December 2021, they can claim the entire purchase price in financial year 2021.

Alternatively, they can depreciate this expenditure over the useful life of one year: in this case, 1/12 of the costs is allocated to 2021 and 11/12 to 2022.

The new rules on depreciation of computers and similar items cover a large number of devices and software products. The legislator includes all hardware and software for data processing as well as peripheral devices. These include, for example:

• PC and laptop
• Mobile workstation
• Keyboard, mouse and headset
• External storage media
• Output devices such as projectors
• Printers and scanners
• All software programmes such as operating systems or ERP systems

As a rule, taxpayers benefit from the change in depreciation rules. They claim their expenditure on hardware and software immediately in the year of acquisition, which reduces their tax burden at once and in full.

A disadvantage only arises if income increases sharply in subsequent years and depreciation on software and hardware would have a greater tax-reducing effect. In that case, contact your established tax practice!

Free initial consultation

Taxes not your thing? Then they're ours.

Guhr Steuerberatung handles your bookkeeping, tax returns and tax planning – so you can focus on your business.

Request a consultation

• Image source: Andrea Piacquadio - Pexels.com