Photovoltaic Depreciation in 2026: Deducting a PV System for Tax Purposes Using IAB, AfA, and Special AfA
Anyone who depreciates a commercial PV system can combine the investment deduction, special depreciation, and declining-balance depreciation, thereby claiming up to 77.5 percent of the investment as a tax deduction in the first two years.
The short answer
Depreciation of a solar power system is the key tax incentive —but only for systems above 30 kWp and only for rooftop or ground-mounted systems. Systems up to 30 kWp per unit are tax-exempt under Section 3, No. 72 of the Income Tax Act (EStG) and, as such, cannot be depreciated.
Four components build on one another: IAB 50 percent (prior to acquisition), special depreciation 40 percent, declining-balance depreciation 15 percent, and straight-line depreciation 5 percent over 20 years.
Up to 77.5 percent over two years —this is a two-year figure, not a first-year effect, and applies only to purchases made in January. The benefit is a liquidity effect, not a tax break.
New starting in 2028: The corporate income tax rate will be gradually reduced from 15 to 10 percent—an additional argument in favor of retained-earnings structures for long-term investments.
Depreciation of a PV system is the key tool commercial operators use to reduce their tax burden—and is therefore a key factor in the profitability of a photovoltaic system. This article is intended for investors, business owners, and their tax advisors who wish to depreciate a PV system in a tax-efficient manner. Whether you can depreciate a PV system and the amount of the depreciation allowance depend primarily on the system’s size in kilowatt-peak (kWp) and the type of building.
A note before we begin: Depreciation applies only to taxable systems with a capacity of more than 30 kWp. Systems with a capacity of up to 30 kWp per unit have been exempt from income tax since the 2022 tax assessment period and, therefore, cannot be depreciated. We outline the rules for depreciating PV systems for investors and businesses—including the relevant section of the law and the calculation method for each.
The 30-kWp Threshold: Why System Size Determines Depreciation
Photovoltaic systems are business assets: They are purchased, depreciated, and generate taxable income—or they are tax-exempt and, in that case, cannot be depreciated. Solar systems up to 30 kWp per residential or commercial unit have been exempt from income tax since the 2022 tax assessment period. This is an advantage for homeowners. For investors who wish to claim a tax deduction for a PV system, this exemption eliminates any flexibility in tax planning.
The fundamental choice, therefore, is between tax-exempt simplicity and tax-liable flexibility. Investors or businesses that opt for a system exceeding 30 kWp—often installed on commercial properties—gain access to depreciation options that significantly reduce the effective acquisition costs in the first few years. The critical borderline case is discussed below.
Depreciation of a Solar Power System in 2026: An Overview of Straight-Line, Declining-Balance, and Special Depreciation Methods
The Photovoltaic System as a Movable Asset
For commercial PV systems classified as tangible fixed assets, there are four components available that build upon one another. The investment deduction applies in the year prior to acquisition, while the three types of depreciation apply starting from the date the system is put into operation. Which method makes the most sense depends on the month of acquisition and the company’s profit situation.
A brief explanation of the four terms:
- Straight-line depreciation: spreads the acquisition cost of the PV system evenly over 20 years—that is, 5 percent per year.
- Declining-balance depreciation: allows for higher depreciation in the early years—15 percent of the remaining book value—for assets acquired on or after July 2025.
- Special depreciation: allows for an additional deduction of up to 40 percent of the costs, which may be allocated freely over the first five years (Section 7g(5) of the Income Tax Act).
- Investment Deduction (IAB): Allows you to deduct 50 percent of the planned acquisition costs in the year prior to the investment.
Depreciation of a Photovoltaic System: The Four Components
| Instrument | Sentence | Effect | Legal basis |
|---|---|---|---|
| Investment Tax Credit (ITC) | 50% of the acquisition cost | in the year prior to the purchase | § 7g(1) of the Income Tax Act |
| Special depreciation | 40%, freely distributable over 5 years | in addition to the regular depreciation | § 7g(5) of the Income Tax Act |
| Declining-Balance Depreciation | 15% of the remaining book value (PV) | July 1, 2025, through December 31, 2027 | § 7(2) of the Income Tax Act |
| Straight-line depreciation | 5% per year over 20 years | permanently | § 7(1) of the Income Tax Act |
The order is important: The IAB reduces the tax base on which special depreciation and declining-balance depreciation are subsequently calculated. Those who combine these tools achieve the maximum immediate benefit—but always as a liquidity advantage, not as a final tax savings. Over the entire useful life, the investment amount is depreciated exactly.
Capital Expenditure Deduction (IAB): Save on taxes before making a purchase
Requirements for the IAB
The investment deduction applies even before a single euro has been spent. For tax purposes, photovoltaic systems are considered movable business equipment (R 7.1, para. 3, EStR) and are eligible for the investment deduction, even if they are permanently mounted on a roof. Four requirements must be met:
- Profit Limit: Profit in the tax year may not exceed 200,000 euros (Section 7g(1), sentence 2, no. 1 of the Income Tax Act (EStG)).
- Operational utilization: at least 90 percent—not an issue with full feed-in.
- Investment period: Purchase must be made within three years. An IAB from 2026 requires the investment to be made no later than December 31, 2029.
- Movable asset: A rooftop or ground-mounted system meets this criterion.
In the year of investment, the IAB is added back to the profit (+50,000 euros); at the same time, the acquisition cost is reduced by the same amount (−50,000 euros, § 7g(2), sentence 3, EStG). The reduced tax base then applies to all subsequent depreciation charges.
Consequences of Not Investing
If no investment is made, the tax office will retroactively revoke the IAB. Section 7g(3), sentence 4 of the Income Tax Act (EStG) expressly stipulates that Section 233a(2a) of the General Tax Code (AO) does not apply: The interest on back payments of 1.8 percent per year (Section 238(1a) of the German Fiscal Code (AO)) then accrues retroactively from the year of deduction—not just from a later effective date—and even in cases where tax assessments are already final. An IAB without a serious intention to invest can thus prove costly.
Special depreciation under Section 7g(5) of the Income Tax Act (EStG): 40 percent
This feature makes the special depreciation allowance particularly valuable: Even if an asset is put into service in December, it qualifies for the full 40 percent depreciation in the year of acquisition, whereas the regular depreciation allowance applies only at one-twelfth of that rate. If the IAB is used, the 40 percent is calculated based on the already reduced acquisition cost. Small and medium-sized enterprises can take advantage of the full rate, provided they remain within the profit limit.
Requirements and Differences from the IAB
One often-overlooked difference concerns this profit threshold. Special depreciation also requires a prior-year profit of no more than 200,000 euros—however, unlike with the IAB, it is not the year of deduction that is decisive, but rather the fiscal year preceding the acquisition (Section 7g(6) of the German Income Tax Act (EStG)). Anyone planning to use both instruments should keep an eye on the profit situation in both relevant years.
Depreciating a Solar Power System: Straight-Line and Declining-Balance Depreciation in 2026
Straight-line depreciation: 5 percent over 20 years
Straight-line depreciation allocates the acquisition cost evenly over the asset’s useful life. For photovoltaic systems, this is 20 years, resulting in a 5 percent depreciation rate per year. Depreciation begins in the month of acquisition and is calculated on a pro rata basis by month in the first year. Over the useful life, exactly 100 percent of the cost is thus depreciated.
Declining-balance depreciation: 15 percent starting in July 2025
Declining-balance depreciation allows for higher depreciation in the early years because the rate is applied to the respective remaining book value. Section 7(2) of the Income Tax Act (EStG) permits three times the straight-line rate, capped at 30 percent—which amounts to 15 percent for PV systems. The wording of the law applies to acquisitions “after June 30, 2025, and before January 1, 2028.” For an energy storage system with a useful life of ten years, the maximum rate of 30 percent applies. A one-time switch to straight-line depreciation is permitted at any time, but the reverse is not.
According to the wording of Section 7g(5) of the Income Tax Act (EStG), the special depreciation may be claimed “in addition to the deductions for wear and tear under Section 7(1) or (2)”—that is, in addition to declining-balance depreciation. This combination is clear from the text of the law; however, there is not yet an established administrative interpretation regarding the version effective as of 2025, which is why the combination should be discussed with a tax advisor before implementation.
Depreciation Schedule and Useful Life
The useful life is determined by the official depreciation table for generally usable fixed assets (Item 3.1.6), which specifies 20 years for photovoltaic systems. It is important to note the distinction: Only rooftop and ground-mounted systems are classified as movable assets and are therefore eligible for IAB and declining-balance depreciation. Roof-integrated (in-roof) systems are considered part of the building and are depreciated at a rate of only 3 percent per year under Section 7(4) of the Income Tax Act (EStG)—without IAB, without special depreciation, and without declining-balance depreciation. The entire leverage calculation does not apply in this case.
PV Depreciation in 2026: Key Deadlines
Three deadlines govern PV depreciation in 2026. The declining-balance depreciation method applies only to acquisitions made on or before December 31, 2027. The 40 percent special depreciation applies to acquisitions made after December 31, 2023. And the investment tax credit requires the acquisition to be made within three years of its establishment. Anyone who wants to take full advantage of these provisions should schedule the commissioning date to align with these deadlines.
Tax Deduction for a Solar Power System: Sample Calculation for 100,000 Euros Over Two Years
Assumptions include a net acquisition cost of 100,000 euros, a marginal tax rate of 42 percent, an operating profit of less than 200,000 euros, and commissioning in January 2027. This example represents a taxable system with a capacity of 30 kWp, such as a commercial rooftop or ground-mounted system operating under full feed-in.
| Step | Year | Process | Amount |
|---|---|---|---|
| IAB Education | 2026 | 50% × 100,000 € | −50.000 € |
| IAB Addition + AK Reduction | 2027 | +50,000 € / −50,000 € (neutral) | 0 € |
| New Tax Base | 2027 | following the IAB cutback | 50.000 € |
| Special depreciation | 2027 | 40% × €50,000 | −20.000 € |
| Declining-Balance Depreciation | 2027 | 15% × €50,000 | −7.500 € |
| Total Decrease in Profit | 2026 + 2027 | total tax leverage | −77.500 € |
| Simplified model calculation; not tax advice. Rates apply to the acquisition cost of 50,000 euros, reduced in accordance with IAB. Assumptions: Commissioning in January 2027; marginal tax rate of 42 percent. | |||
Depreciation of Solar Power Systems: The Results in Numbers
In the first year, the IAB alone results in a reduction in profits of 50,000 euros and thus tax savings of approximately 21,000 euros—without any investment. In the second year, there is an additional reduction in profits of 27,500 euros (approximately 11,550 euros in savings). In total, that amounts to a €77,500 reduction in profit and €32,550 in tax savings.
Two points are crucial for classification. First, the 77.5 percent figure is a two-year value, not a first-year effect: 50 percent of the IAB is incurred in the year prior to the acquisition; in the year of investment itself, it amounts to only 27.5 percent. Second, this figure applies only to acquisitions made in January—the declining-balance depreciation method is calculated on a monthly basis, whereas the special depreciation allowance is not. If the asset is put into service in October, the two-year figure drops to approximately 71.9 percent. The tax benefit is a liquidity effect, not a tax waiver: Over 20 years, exactly 100,000 euros are depreciated.
To put the price and investment amount into perspective: A commercial rooftop system with a capacity of over 30 kWp currently costs around 900 to 1,600 euros per kWp (Fraunhofer ISE). A 100-kWp system is therefore in the same order of magnitude as the example calculation; the percentage leverage remains the same up to the IAB upper limit of 200,000 euros per business. Our article on PV Investment 2026 shows how this tax optimization affects profitability.
Sales Tax: Zero Rate and Input Tax Credit
This has two consequences that are often confused. For eligible buildings, the zero tax rate may apply even above 30 kWp; above this threshold, only the simplified presumption of compliance no longer applies. Conversely, for a purely commercial system on an industrial roof that does not serve the public good, the standard rate of 19 percent applies—regardless of the system’s capacity. The common assertion that “it’s always 19 percent above 30 kWp” is incorrect in its generalization.
For investors, standard taxation is often an advantage: the full amount of input tax from the purchase is refunded. For a net amount of 200,000 euros, this amounts to a 38,000-euro input tax refund. A 19 percent value-added tax must then be paid on revenue from grid feed-in and direct sales; the market premium is excluded as a non-taxable subsidy.
The small business regulation was reformed effective January 1, 2025 (JStG 2024): The prior-year threshold is 25,000 euros, and the current-year threshold is 100,000 euros. Opting out of the regulation is binding for at least five years. For businesses subject to 19 percent value-added tax with a high volume of input tax, opting out is usually worthwhile; for those subject to zero percent tax, it rarely is.
§ 3 No. 72 of the Income Tax Act (EStG): The Critical Borderline Case for Investors
Since the enactment of the 2024 Annual Tax Act, a uniform limit of 30 kWp per residential or commercial unit and a total of 100 kWp per taxpayer or partnership applies to new systems acquired, commissioned, or expanded after December 31, 2024. The previous graduated scale of 15 kWp per unit for multi-family and other buildings now applies only to existing systems through December 31, 2024. The 100 kWp is an exemption limit, not a tax-free allowance: if this limit is exceeded, the exemption applies to no systems at all.
The key dilemma for investors: Tax-exempt income blocks any depreciation. According to Section 3c(1) of the Income Tax Act (EStG), neither investment-related expenses (IAB) nor depreciation (AfA) nor operating expenses are deductible for a tax-exempt system—not even financing interest. This creates a sharp tipping point rather than a gradual transition: At 29 kWp, debt financing is of no tax value; at 31 kWp, it is fully deductible. Anyone planning a system near this threshold should calculate the impact before purchasing—including with a view toward a possible expansion to include an energy storage system.
Our article on the investor model explains how the Logic Energy investor model is structured with investments in the taxable sector. The tax aspect is part of the overall return—along with EEG payments and direct sales revenue.
Legal Structure and Business Tax: What Investors Need to Keep in Mind in 2026
Business Tax on Debt-Financed Investments
With regard to trade tax, two points are relevant for debt-financed investments. Under Section 8 No. 1a of the Trade Tax Act (GewStG), one-quarter of debt service payments is added to taxable income to the extent that they exceed the exemption threshold of 200,000 euros. In the initial phase, when depreciation is high, this can result in an income tax loss occurring alongside a positive trade income. For rental structures, the extended deduction under Section 9(1), sentence 3, letter b of the Trade Tax Act (GewStG) may also apply: Electricity supplies are tax-neutral up to 20 percent of property income, but may not be supplied to end users unless they are tenants of the plant operator.
Corporate income tax will decrease starting in 2028
For corporations, the immediate tax investment program improves the long-term outlook. Starting in 2028, the corporate income tax rate will be reduced in five steps from 15 percent to 10 percent by 2032. At the same time, the retained earnings tax rate under Section 34a of the Income Tax Act (EStG) will decrease from 28.25 percent to 25 percent starting in 2032. For long-term photovoltaic systems with a 20-year lifespan, this provides a predictable, legally established option for structures that retain earnings.
| Legal Form | Advantage | Please note |
|---|---|---|
| Sole Proprietorship | Simple, tax-free allowance of €24,500 (business tax) | Full tax progression on profits |
| GbR / Partnership | for multiple investors | Joint ownership; the 100-kWp limit applies jointly |
| GmbH | Tax deferral benefit, declining corporate income tax starting in 2028 | Ongoing expenses, no corporate income tax exemption |
Include a solar power system on your tax return
The investment tax credit is reported in Schedule EÜR in the year it is claimed—that is, before the facility is even connected to the grid. In the year of acquisition, the investment deduction is added back, and depreciation is calculated based on the reduced tax base. Because even small errors regarding deadlines and the tax base can be costly, it’s best to have a tax advisor handle the correct reporting—though investors should still understand the basic logic behind it.
What You Need to Discuss with Your Tax Advisor Before Investing
These points should be clarified before making any investment:
- Tax Status: Does the investment fall under Section 3, No. 72 of the Income Tax Act (EStG) (tax-exempt), or is it subject to tax? The entire strategy depends on this.
- IAB Timeline: Take advantage of up to three years' lead time, secure the profit threshold in the year of deduction, and document investment intentions.
- Date of commissioning: January is favorable for regular depreciation; the special depreciation allowance is not prorated anyway.
- Legal structure: sole proprietorship, GbR, or GmbH—each structure has its own implications for business tax and corporate income tax.
- Sales Tax: Weigh the options of a zero tax rate or standard taxation against the five-year restriction on input tax refunds.
Examine Cost-Effectiveness and Tax Leverage Together
Logic Energy prepares a customized profitability analysis for each prospective investor based on actual installation costs, current EEG feed-in tariffs, and your marketing strategy. These figures serve as the foundation for you to develop the appropriate structure in consultation with your tax advisor. The contracting party for direct PV investments is mediplan Helm e.K. (a registered business entity with personal liability of the owner pursuant to Sections 1, 17, and 19 of the German Commercial Code (HGB)).
Frequently Asked Questions About Depreciation of Solar Power Systems
Can you save on taxes with a solar power system?
Yes. Commercial systems with a capacity of more than 30 kWp can be deducted through the investment deduction, special depreciation, and declining-balance depreciation. In the first two years, up to 77.5 percent of the investment can be deducted from taxable income. The result is a liquidity advantage, not a tax exemption. A tax advisor should verify whether this applies to your specific situation.
How do you depreciate a solar power system?
A solar power system is depreciated over 20 years. Options include straight-line depreciation at 5 percent per year, or alternatively, declining-balance depreciation at 15 percent of the remaining book value (limited to the end of 2027), as well as a special depreciation allowance of 40 percent under Section 7g(5) of the German Income Tax Act (EStG).
What is the special depreciation allowance for solar power systems in 2026?
The special depreciation allowance amounts to 40 percent of the acquisition cost and may be freely allocated over the first five years (Section 7g(5) of the Income Tax Act). It applies to acquisitions made after December 31, 2023, and is not prorated—even if the asset is put into service in December, the full rate applies.
What is the declining balance depreciation method for photovoltaic systems in 2026?
Declining-balance depreciation allows for a 15 percent deduction from the respective remaining book value instead of the 5 percent under the straight-line method (Section 7(2) of the Income Tax Act). It applies to acquisitions made between July 1, 2025, and December 31, 2027. For battery storage systems, the rate is up to 30 percent. A switch to straight-line depreciation is possible at any time.
What is the investment tax credit for photovoltaic systems?
Under Section 7g(1) of the Income Tax Act (EStG), the IAB allows 50 percent of the planned acquisition costs to be deducted in the year prior to the investment, up to a maximum of 200,000 euros per business. The requirements are a profit of less than 200,000 euros in the previous year, at least 90 percent business use, and the acquisition must take place within three years.
Where is the depreciation of the solar power system entered on the tax return?
In a cash-basis accounting system, depreciation, special depreciation, and the initial investment allowance (IAB) are recorded in Schedule EÜR. The profit from operating the photovoltaic system is reported in Schedule G. The IAB is reported in the year it is recognized, that is, before the actual purchase.
Does the 0 percent sales tax still apply to photovoltaic systems?
The zero tax rate (Section 12(3) of the German Value-Added Tax Act (UStG)) has applied since 2023 to systems installed on or attached to residential, public, or public-benefit buildings. The 30-kWp limit is intended solely to simplify the documentation process. Purely commercial systems installed on industrial roofs are subject to a 19 percent tax rate—but with full input tax deduction on the purchase price.
Do solar power systems have to pay business tax?
Commercial PV systems are subject to trade tax. Partnerships are entitled to an exemption of 24,500 euros (Section 11 of the Trade Tax Act (GewStG)). In the case of debt financing, one-quarter of the interest payments exceeding 200,000 euros is added to the taxable amount (Section 8 No. 1a of the Trade Tax Act). Corporations do not have an exemption, but will benefit from the declining corporate income tax rate starting in 2028.
Can IAB and special depreciation be combined?
Yes. The IAB first reduces the tax base; special depreciation and declining-balance depreciation are then calculated based on the reduced acquisition cost. According to the wording of Section 7g(5) of the Income Tax Act (EStG), combining this with declining-balance depreciation is also permitted. The specific implementation should be discussed with a tax advisor.
Conclusion
Depreciation is the most powerful tax lever for a PV investment—but only above the 30-kWp threshold and only for rooftop or ground-mounted systems. Those who combine the IAB, special depreciation, and declining-balance depreciation can shift up to 77.5 percent of the investment into the first two years as a reduction in profits. Planning before the purchase is crucial: system size, building type, year of acquisition, and legal structure determine how much of this tax benefit is actually realized.
Important Note: This article is intended solely for general informational purposes and does not constitute investment, tax, or legal advice. Logic Energy is neither a tax nor a financial advisor, nor is it a bank; the contractual partner for direct PV investments is mediplan Helm e.K. (a registered merchant with personal liability of the owner pursuant to Sections 1, 17, and 19 of the German Commercial Code (HGB)). All examples are simplified model calculations; their completeness or tax accuracy in individual cases is not guaranteed. A licensed tax advisor must verify their applicability to specific circumstances. Tax laws and Federal Ministry of Finance (BMF) circulars are subject to ongoing changes. All information is provided without guarantee. As of July 2026.
Sources and Legal Basis
- § 7g EStG – Investment Deductions and Special Depreciation – Investment Deduction (IAB) 50%, cap of €200,000; Special Depreciation 40%, profit threshold of €200,000
- § 7 EStG – Depreciation Allowance – straight-line depreciation at 5%, declining-balance depreciation after June 30, 2025, and before January 1, 2028, up to a maximum of 30%
- § 3 No. 72 of the Income Tax Act (EStG) – Tax Exemption for Photovoltaic Systems and § 52 of the Income Tax Act (EStG) – 30 kWp per unit, 100 kWp in total; effective January 1, 2025
- § 12(3) of the German Value-Added Tax Act (UStG) – Zero tax rate – 0% for residential, public, and public-benefit buildings; 30 kWp as a simplification rule
- Section 8(1a) of the Trade Tax Act (GewStG) and Section 11 of the Trade Tax Act (GewStG) – Inclusion of debt service payments, trade tax exemption of €24,500
- Section 23 of the Corporation Tax Act (KStG) and Section 34a of the Income Tax Act (EStG) – Corporation tax rate reduced from 15% to 10% (2028–2032), retention rate
- Act on an Immediate Tax Investment Program —Declining-Balance Depreciation, Corporate Income Tax, § 34a of the Income Tax Act (BGBl. 2025, promulgated July 18, 2025)
- Federal Ministry of Finance (BMF) – FAQ: “Value-Added Tax Measures to Promote the Expansion of Photovoltaic Systems”
- Federal Ministry of Finance – Income Tax Handbook 2025, Appendix 27a (Section 3, No. 72 of the Income Tax Act)
- Fraunhofer ISE – Current Facts About Photovoltaics in Germany – System Cost Ranges
Logic Energy Editorial Team. All information is provided without warranty. As of July 2026. Legislation and BMF letters are subject to change.
