Between 2025 and 2027, German tax law offers a combination of special depreciation options that has rarely been this attractive:

  • 40% special depreciation under § 7g EStG for small businesses
  • up to 30% declining-balance depreciation ("investment booster") per year for movable fixed assets

Used correctly, you can massively reduce your tax burden and improve cash flow during growth phases - for example when purchasing machinery, vehicles, or IT hardware.

In this article, we walk you through, in practical terms:

  • how the 40% special depreciation works from 2025,
  • what the investment booster (30% declining-balance depreciation) delivers in concrete terms,
  • how to combine both tools for your SME,
  • and which timing strategies make sense through 2027.

1. Starting point: Depreciation of movable assets in 2025

As a rule, movable, depreciable fixed assets (e.g. machinery, vehicles, IT equipment) are depreciated on a straight-line basis over their useful life - with a 10-year useful life, that means 10% per year.

The Growth Opportunities Act (Wachstumschancengesetz) retroactively increased the well-known special depreciation under § 7g EStG for small businesses from 20% to 40% for assets acquired on or after 1 January 2024.

In addition, since July 2025 the "Act on an Immediate Tax Investment Program to Strengthen Germany as a Business Location" (often referred to as the "investment booster") has been in force. Its core element is declining-balance depreciation of up to 30% per year for movable fixed assets that are acquired or manufactured between 1 July 2025 and 31 December 2027.

For SMEs, this creates a very powerful investment booster: you can claim investment costs for tax purposes much more quickly and thus pull liquidity into the business.

2. 40% special depreciation from 2025: What is behind it?

2.1. Legal basis and basic mechanics

The special depreciation under § 7g (5) EStG allows you, for certain investments and in addition to regular depreciation (AfA), to deduct up to 40% of acquisition or production costs for tax purposes.

Key points:

  • Eligible are movable, depreciable fixed assets (e.g. machinery, vehicles, production equipment, typical office and IT hardware).
  • The asset must
    • in the year of acquisition/production and the following year
    • be used almost exclusively for business purposes (at least 90%) in a domestic permanent establishment or be leased out from there.
  • The total special depreciation of up to 40% can be spread flexibly over the year of acquisition and the four following years (a 5-year eligibility period).
  • It is a purely tax-based provision - under commercial law the "normal" depreciation remains unchanged.

2.2. Who can use the 40% special depreciation?

The prerequisite is that profit in the preceding financial year (before taking the special depreciation) did not exceed €200,000. This applies regardless of legal form (sole proprietorship, partnership, small corporation).

Important:

  • The €200,000 threshold is not tied to the EU SME definition, but solely to taxable profit.
  • Investment deductions (Investitionsabzugsbeträge, IAB) and corresponding add-back amounts are ignored when determining the profit threshold.

2.3. Practical example: €100,000 machine with 40% special depreciation

Scenario:

  • Acquisition in 2025: new machine
  • Acquisition cost: €100,000
  • Useful life: 10 years (straight-line depreciation €10,000/year)
  • You meet the €200,000 profit threshold.

Option A - without special depreciation

  • Annual depreciation: €10,000
  • Tax expense in year 1: €10,000

Option B - with 40% special depreciation (fully in year 1)

  • Straight-line depreciation year 1: €10,000
  • Special depreciation year 1: €40,000 (40% of €100,000)
  • Tax expense year 1: €50,000

Assuming a combined income tax and trade tax rate of 30%, your tax bill in year 1 falls by €12,000 (€40,000 additional depreciation × 30%). Regular depreciation continues in subsequent years.

Effect: You "pull forward" a significant portion of the tax burden into the year of acquisition and thereby strengthen liquidity in the investment year - precisely when the cash outflows occur.

3. Investment booster 2025-2027: 30% declining-balance depreciation

3.1. Core of the regulation

With the investment booster, declining-balance depreciation under § 7 (2) EStG has been reintroduced and enhanced:

  • It applies to movable, depreciable fixed assets (e.g. machinery, vehicles, operating equipment, office furnishings),
  • that are acquired or manufactured between 1 July 2025 and 31 December 2027,
  • Depreciation rate: up to 30% per year, at most three times the straight-line rate,
  • Usable for both new and used movable assets.

Declining-balance depreciation is an option: you may alternatively continue to use straight-line depreciation.

3.2. Example: €100,000 machine - straight-line vs. 30% declining-balance

Scenario:

  • Acquisition: 1 January 2026
  • Acquisition cost: €100,000
  • Useful life: 10 years (10% straight-line depreciation)

Straight-line depreciation (10%)

  • Years 1-10: €10,000 each year

Declining-balance depreciation (30%)

  • Year 1: €30,000 (30% of €100,000)
  • Year 2: €21,000 (30% of €70,000)
  • Year 3: €14,700 (30% of €49,000)

After three years, you have already depreciated €65,700 for tax purposes - compared with €30,000 under straight-line depreciation.

Conclusion: Declining-balance depreciation acts like a powerful "accelerated tax depreciation Germany 2025" lever: you write assets off more quickly, reduce your tax burden earlier, and gain liquidity - with the same total depreciation over the useful life.

3.3. Special case electric vehicles: 75% in the first year

For fully electric company vehicles acquired between 1 July 2025 and 31 December 2027, a special declining-balance scheme applies:

  • 75% in the year of acquisition,
  • then 10%, 5%, 5%, 3%, and 2% in the following years.

This rule is an additional booster, for example when converting your fleet to electric mobility. It cannot be combined with other special depreciation allowances on the same vehicle.

4. Combination: 40% special depreciation + 30% investment booster

Things get especially interesting for typical SMEs that both

  • stay within the €200,000 profit limit (for § 7g),
  • and invest from July 2025 onwards.

In that case, two building blocks can be combined:

  • declining-balance depreciation of up to 30% per year (investment booster), and
  • special depreciation of up to 40% of acquisition costs under § 7g - explicitly in addition to straight-line or declining-balance depreciation.

Practical example: €100,000 machine, acquisition 1 January 2026

Assumptions:

  • Profit 2025: €180,000 -> special depreciation allowed
  • Acquisition in 2026 (within booster period)

Option - aggressive investment boost

  • Declining-balance depreciation year 1: €30,000
  • Special depreciation year 1: €40,000
  • Total depreciation year 1: €70,000

This produces an extremely strong liquidity effect - at a 30% tax rate you save €21,000 in taxes in the investment year. In subsequent years you still have at your disposal:

  • declining-balance depreciation on the remaining book value (30% p.a., as long as it remains advantageous), and
  • any remaining special depreciation (if you do not use the full 40% in the first year).

However, whether this "maximum front-loading" makes sense for your business depends, among other things, on:

  • expected profits in subsequent years,
  • loss carryforwards,
  • financing terms and covenants,
  • planned dividend distributions or withdrawals.

This is exactly where integrated tax and financial planning comes into play.

5. Practical examples: How SMEs can use the investment booster in real life

Example 1: Manufacturing company - €250,000 machinery investment in 2026

  • Profit 2025: €160,000
  • Investment 2026: two new machines, total €250,000
  • Useful life: 10 years

Without special rules (straight-line only)

  • Depreciation year 1: €25,000
  • Tax saving (30%): €7,500

With 40% special depreciation + 30% declining-balance

  • Declining-balance depreciation year 1: €75,000 (30% of €250,000)
  • Special depreciation year 1: up to €100,000 (40% of €250,000)

Even if the company claims "only" €60,000 in special depreciation, this results in:

  • Total depreciation year 1: €135,000
  • Tax saving (30%): €40,500

The difference compared to straight-line depreciation in the first year is over €30,000 in additional liquidity. Straight-line or declining-balance depreciation continues in the following years.

Example 2: IT service provider - €80,000 for servers & hardware in 2025/2026

  • Profit 2024: €210,000 -> special depreciation under § 7g not available
  • Investment 1: Q4/2025 - €30,000 servers
  • Investment 2: Q2/2026 - €50,000 network & storage hardware

Strategy:

  • 2025: straight-line depreciation, with possible use of the older 20% declining-balance regime if applicable.
  • 2026: switch to 30% declining-balance depreciation for the new hardware (within the booster period).

Result:

  • significantly higher depreciation charges in 2026-2028,
  • improved planning certainty, as you are not bound by the €200,000 profit threshold.

For many larger mid-sized companies that regularly exceed the profit limit, this 30% investment booster is the key instrument.

6. Timing strategy through 2027: When is which investment worthwhile?

6.1. Time windows at a glance

From 1 January 2024

  • 40% special depreciation under § 7g EStG available for small businesses (see details above)