Can you write off refurbished items?

Short & sweet

With depreciation (AfA), you save taxes by purchasing work equipment. The depreciation takes into account the loss in value caused by use, aging, or technological progress. You must depreciate assets over 800 euros over several years

What is depreciation?
Suppose you buy something for your work or for your rented property – be it a fancy office chair or a new heating system. Over time, this asset loses value because it is used. This is where depreciation comes into play, also called "Absetzung für Abnutzung" (AfA). It ensures that you can deduct a part of the purchase price from your taxes annually, spread over the useful life of the item.

Who can claim the depreciation in the tax return?

Employees on advertising expenses

Self-employed persons in business expenses

Landlord for the advertising expenses of their property

Linear vs. declining balance depreciation

There are various methods to determine the amounts for the annual depreciation of the asset.

Linear depreciation: The equalizer

You have acquired an expensive work tool. With straight-line depreciation, you distribute its costs evenly over the useful life. To do this, you simply divide the purchase price by the number of years you can use the item. The annual amount that results is claimed on your taxes. Basically, the same amount is depreciated each year. This method is the classic among depreciations.

Declining balance depreciation: The turbo in the first years

With declining balance depreciation, you can write off a large amount initially – as a percentage of the acquisition cost. This means that in the first years after your investment, the tax savings cash register rings especially loudly. Especially after economically tough times, this is a real booster for your finances and an incentive not to postpone necessary purchases.

The declining balance depreciation is allowed for movable fixed assets that were acquired between January 1, 2020, and December 31, 2022.

It is possible that the Growth Opportunities Act will temporarily introduce a slightly modified declining balance depreciation for acquisitions between April 1, 2024, and December 31, 2024. However, the corresponding law has not yet been passed.

When does it make sense to switch from declining balance to straight-line depreciation?

The declining balance depreciation acts like a turbo for your tax return, especially in the first years after your investment. You can write off higher amounts, which significantly reduces your tax burden. But with each year, the depreciation amount decreases. This is exactly where you can think strategically.

As soon as the annual amounts of the declining balance method fall below the constant amounts of the straight-line depreciation, it is time to switch. This step is not only allowed but can provide you with a significant tax advantage. The ability to switch between depreciation methods offers you flexibility that can lead to real savings.

Deduct private use

You can only use depreciation for things that you acquire for your profession or your business. For assets that are used both professionally/business-wise and privately, in some cases at least a partial deduction is possible. This is the case when the two areas can be clearly separated from each other.

Example: If you, as an employee with an office job, buy a laptop that you use for mixed purposes, the tax office simplistically accepts that you deduct half as private use. After all, 50 percent of the acquisition costs then count as advertising expenses.

Calculate depreciation correctly

The easiest way to do the calculation is with WISO Steuer. The program not only knows all the depreciation tables but also knows how you can best deduct your new laptop, your refrigerator, or the new heating system in your rented apartment for tax purposes.

You don't have to wade through lengthy tables or worry about missing an important point – the program includes everything that is important for the calculation. WISO Steuer takes the calculation work off your hands with just a few simple inputs. Just enter your purchases and let the program do the work. While WISO Steuer juggles the numbers, you can sit back and relax.

You want to know more about how the calculation of depreciation works? Here you will find a summary with calculation examples:

1. Linear depreciation

The linear depreciation per year is calculated using the following formula:

Depreciation amount = Acquisition cost / Useful life

Important: The month of purchase plays a big role. For example, if you buy something during the year, you cannot depreciate it for the entire year, but only for the remaining months. After that, you distribute the residual value evenly over the years you expect to use the item.

2. Declining Balance Depreciation

The declining balance depreciation (for acquisitions in the years 2020 to 2022) calculates the depreciation amount as a fixed percentage of the respective book value at the beginning of the year. The declining balance depreciation rate may be up to 2.5 times the straight-line depreciation, but no more than 25 percent.

Depreciation: The standard case of amortization

With straight-line depreciation, you distribute the acquisition costs evenly over the useful life. So you write off the same amount each year.

To take depreciation (AfA) for your purchases or investments into account in the tax return, you must meet some requirements:

Professional use: The asset is used for professional or business purposes.

Useful life: The useful life of the asset must be more than one year. Short-lived assets that are consumed or used within one year are depreciated immediately. This has generally applied to computer hardware and software since 2021.

Depreciability: The asset must be depreciable. For example, land is excluded from depreciation because it does not wear out. Buildings or machines, on the other hand, can be depreciated.

Independent usability: The asset must be independently usable. It must be able to perform its function without the help of other goods.