Investment Booster 2026: 30 % declining balance depreciation for companies

The investment booster has been in force since July 2025 - and will take full effect in 2026. Anyone who purchases machinery, vehicles or hardware as a self-employed person or company can claim significantly higher depreciation and noticeably reduce their tax burden. This guide explains what the new rules mean in concrete terms, where the pitfalls lie and how the investment booster can be sensibly combined with the investment deduction amount (IAB) and special depreciation.

Table of contents

• What is the investment booster
• Degressive depreciation with up to 30%: The key data for 2026](#degressive-afa-with-up-to-30--die-eckdaten-fuer-2026)
• Which assets are favoured?](#welche-wirtschaftsgueter-sind-beguenstigt)
• Electric vehicles: 75% depreciation in the first year
• Clever combination of investment deduction amount and special depreciation allowance
• Research allowance 2026 as additional leverage
• Practical example: €100,000 machine
• What you should consider for your bookkeeping
• Frequently asked questions
• Conclusion](#conclusion)
• Sources](#sources)

What is the investment booster?

The term "investment booster" is the political term for the Act for an immediate tax investment programme to strengthen Germany as a business location. The aim is to promote investment in fixed assets and research in the short term by extending and accelerating tax depreciation.

Three components are particularly relevant for the self-employed and companies:

• Re-introduction of declining balance depreciation of up to 30%
• Special depreciation rule for purely electric vehicles
• Extension of the research allowance from 2026

There are also further tax adjustments. The first two points in particular have a direct impact on sole traders and partnerships.

Degressive depreciation with up to 30 %: The key data for 2026

The declining balance method of depreciation in accordance with Section 7 (2) EStG is once again permitted - albeit for a limited period.

• Acquisition or production period: between 1 July 2025 and 31 December 2027
• Maximum of three times the straight-line depreciation, but no more than 30% of the respective residual book value
• Only movable fixed assets are eligible for tax relief
• Can be combined with investment deduction amount (IAB) and special depreciation in accordance with Section 7g EStG

The declining balance method calculates depreciation annually on the basis of the remaining residual book value. In the year of acquisition, depreciation is calculated pro rata temporis according to the time of acquisition and use.

A change from the declining balance to straight-line depreciation is permitted at a later date and often makes sense as soon as the straight-line depreciation on the remaining residual value is higher than the declining balance amount. It is not possible to switch back to declining balance depreciation at a later date.

When is declining balance depreciation worthwhile?

Degressive depreciation shifts depreciation more to the first few years of an investment. This reduces the tax burden earlier and liquidity remains in the company.

The method is particularly interesting if:

• high tax burdens are to be reduced in the short term,
• liquidity is required for financing or growth,
• or the investment does not remain in the business for its full useful life.

Which assets are favoured?

Only movable, depreciable fixed assets are eligible.

These typically include

• Machinery and tools
• Vehicles and trailers
• Office furniture and shop fittings
• IT hardware such as servers, notebooks or cash register systems
• Equipment for workshops, practices or studios

There is also a special depreciation rule for purely electric vehicles in accordance with Section 7 (2a) EStG.

Not favoured are

• Real estate and buildings
• Intangible assets such as trade mark rights or patents
• Low-value assets up to € 800 net
• Current assets such as merchandise
• Privately purchased items

Electric vehicles: 75 % depreciation in the first year

Since 1 July 2025, a special arithmetic-degressive depreciation rule has applied to purely electric vehicles held as business assets in accordance with Section 7 (2a) EStG.

This means that up to 75% of the acquisition costs can be depreciated in the first year.

The staggered depreciation:

• Year 1: 75 %
• Year 2: 10 %
• Year 3: 5 %
• Year 4: 5 %
• Year 5: 3 %
• Year 6: 2 %

The regulation only applies to purely electric vehicles. Plug-in hybrids and vehicles with combustion engines are not eligible.

Whether used electric vehicles also fall under the scheme has not yet been conclusively clarified. Some argue that used vehicles could also be eligible if they are allocated to the business for the first time.

The 75% rule cannot be used in parallel with the special depreciation allowance under Section 7g (5) EStG for the same vehicle.

In addition, the price limit for the preferential 0.25% taxation of private use for company electric vehicles has been raised to €100,000.

Clever combination of investment deduction and special depreciation allowance

The declining balance depreciation can be combined with the familiar subsidy instruments according to § 7g EStG.

Investment deduction amount (IAB)

The IAB makes it possible to deduct up to 50% of the expected acquisition costs from profits before the actual investment is made.

Prerequisites:

• Profit ceiling of € 200,000
• Investment within three years
• At least 90 % operational use
• Maximum IAB per business: €200,000

The IAB subsequently reduces the depreciation assessment basis.

Special depreciation in accordance with Section 7g (5) EStG

In addition to straight-line or declining balance depreciation, a special depreciation allowance of up to 40 % can be utilised.

The special depreciation can be spread over the year of purchase and the four subsequent years.

Combination example

A company is planning a machine for €100,000 in 2027.

Possible process:

• 2026: 50 % IAB = € 50,000 profit-reducing
• 2027: Purchase of the machine
• Remaining assessment basis: € 50,000
• Additionally up to 40 % special depreciation
• Additional declining balance depreciation on the remaining residual value

This shifts a significant part of the tax effect to the first few years.

Research allowance 2026 as an additional lever

The research allowance will also be extended from 2026.

Important changes:

• Assessment basis increases to €12 million per year
• SMEs will receive an increased funding rate of 35
• Maximum funding of up to €4.2 million per year
• New flat-rate overheads allowance of 20%
• Entrepreneurs' own work will be recognised at up to €100 per hour

The research allowance is offset against income or corporation tax and can also be paid out under certain circumstances.

Practical example: € 100,000 machine

A workshop purchases a CNC machine for €100,000 net at the beginning of 2026. The useful life is 10 years according to the depreciation table.

The total amortisation remains identical over the useful life. The advantage of the declining balance method is that it brings forward the amortisation effect and thus the liquidity advantage.

At a later point in time, a switch to straight-line depreciation can make economic sense. The optimum point in time depends on the residual value and the remaining useful life.

What you should bear in mind for accounting purposes

The following points should be observed so that the tax advantages can be properly utilised:

• Keep an up-to-date list of assets
• Document the acquisition date and depreciation method
• Archive invoices and proof of payment in an audit-proof manner
• Keep evidence of operational use
• Clearly document investments and orders

A shortened retention period of 8 years now applies to accounting documents. Annual financial statements and certain tax documents must still be retained for 10 years.

Frequently asked questions

Does the declining balance depreciation also apply to freelancers and sole traders?

Yes, the regulation applies regardless of the legal form.

Can I depreciate used assets using the declining balance method?

In principle, yes. The regulation does not differentiate between new and used assets.

However, in the special rule for electric vehicles, the treatment of used vehicles has not yet been conclusively clarified.

Can I switch to straight-line depreciation at a later date?

Yes, a change from declining balance to straight-line depreciation is permitted. The reverse switch is not possible.

Is an IAB already worthwhile for a planned investment?

Yes, the IAB is intended for planned investments, provided that the investment is actually realised at a later date.

What applies to small businesses?

Small entrepreneurs can also use the depreciation allowance. As no input tax deduction is possible, the gross amount forms the basis for depreciation.

Conclusion

The investment booster makes 2026 an interesting investment year. The declining balance depreciation of up to 30%, the special regulations for electric vehicles and the extended research allowance create considerable scope for tax planning.

Anyone planning investments anyway should carefully coordinate timing, financing and documentation in order to make the most of the tax benefits.

Sources

1. § 7 EStG - Depreciation for wear and tear
2. § 7g EStG - Investment deduction and special depreciation

3 Federal Ministry of Finance - Research allowance 4 German Bundestag - Instant investment programme

1. IHK information on declining balance depreciation and e-vehicles

*Note: This article does not constitute tax or legal advice.