What is the investment deduction amount (IAB)?

With the investment deduction amount under § 7g EStG, small and medium-sized enterprises can claim planned investments in movable fixed assets for tax purposes in advance. This reduces taxable profit, improving liquidity and easing financing.

Amount of deduction

For the 2025 tax year, up to 50% of the expected acquisition or production costs can be deducted from profits as an investment deduction amount.

Conditions in 2025

A business can create an IAB in 2025 if:

• the profit in the financial year does not exceed 200.000 Euro (before deduction of the IAB),
• regardless of whether the profit is determined by cash accounting or balance sheet accounting.

Special regulations for previous years (before 2020)

• Traders using balance sheet accounting: Business assets max. 235.000 Euro (2009/2010: 335.000 Euro)
• Cash accounting (e.g. freelancers): Profit max. 100.000 Euro (2009/2010: 200.000 Euro)
• Farmers and foresters:
  • Economic value max. 125.000 Euro (2009/2010: 175.000 Euro)
  • Alternatively: Profit max. 100.000 Euro (for cash accounting)

Note: Extended investment periods for old cases

The regular period for using an investment deduction amount is three years. Due to the Corona pandemic, this period was extended for certain years:

• IAB from 2017 or 2018: Deadline until 31.12.2022. Latest possible investment by 31.12.2022.
• IAB with regular deadline 2020 or 2021: Extension to up to 4 or 5 years. Latest possible investment: by 2025.
• IAB with regular deadline 2022: Extension to up to 6 years possible. Latest possible investment: by 2025.

These regulations apply exclusively to investment deduction amounts created before or by 2022. For IAB from 2023, the regular three-year period under § 7g para. 3 EStG applies again.