Investment deduction allowance (IAB)

Who can claim the IAB?

Eligible are active businesses and persons whose profit does not exceed the uniform €200,000 limit in the year before the deduction. This limit applies regardless of the accounting method – balance sheet or cash accounting. Business assets have been irrelevant since 2020.

Which investments qualify?

• Movable, depreciable fixed assets (machinery, vehicles, IT, tools).
• New or used – both are eligible.
• Partially private-use assets too, provided business use is at least 90 % in the year of acquisition and the following year.
• Certain digital assets whose useful life has been reduced to one year by BMF guidance (special use possible).

How does the IAB work in practice?

1. 1In the year the IAB is formed, up to 50 % of expected acquisition cost is deducted off-balance-sheet. Maximum volume: €200,000 per business.
2. 2In the year of acquisition, the IAB is added back off-balance-sheet – and at the same time the actual cost is reduced by the same amount on-balance-sheet (cost reduction).
3. 3Special depreciation under § 7g (40 %) is then applied to the remaining residual amount, freely distributed across the first five years.
4. 4Straight-line AfA continues on the reduced book value.

Practical example

We will model your specific IAB scenario.

Tax savings, liquidity impact and possible reversal risks – in a 30-minute call you will see the numbers for your business and know whether the IAB is worth it for you.

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Worked example: a €100,000 machine

An entrepreneur (GmbH, Berlin multiplier) plans to buy a €100,000 machine in 2027. In 2026, profit is on track for €250,000 – a strong year. He forms an IAB of €50,000 (= 50 %). This brings 2026 profit down to €200,000 – the tax bill drops by roughly €15,000. In 2027, the machine is purchased, the IAB reversed and acquisition cost reduced to €50,000. On those €50,000, €20,000 of special depreciation (40 %) plus regular straight-line AfA are recognised – the investment year benefits a second time.