How can PV investors save on taxes in 2026 using IAB and depreciation?
Excerpt
Investors in a photovoltaic system can, if structured correctly, claim a tax deduction of up to €77,500 on a €100,000 investment in the first two years—through a combination of the investment deduction, special depreciation, and declining-balance depreciation. This article explains how the key tax instruments work and what PV investors should be sure to discuss with a tax advisor.
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Anyone who purchases a taxable PV system with a capacity of over 30 kWp as an investment can claim tax deductions through the investment deduction (IAB, § 7g EStG), special depreciation (40% since the Growth Opportunities Act of 2024), and declining-balance depreciation (15% since July 2025) – a tax savings of over 30,000 euros at a marginal tax rate of 42%. Crucial: Systems under 30 kWp have been exempt from income tax since 2022 (Section 3 No. 72 of the German Income Tax Act (EStG))—which excludes all depreciation. The system size is therefore a strategic decision to be made in advance.
Table of Contents
1. Saving on taxes with solar power: Why the size of the system is the deciding factor
For systems under 30 kWp, Section 3(72) of the German Income Tax Act (EStG) applies, making the system exempt from income tax—for systems of 30 kWp or more, the full range of tax incentives becomes available, including the IAB, special depreciation, and declining-balance depreciation. For investors, the 30-kWp threshold is therefore not a technical detail, but the decisive dividing line between a tax-exempt small-scale system with no room for tax planning and a commercial direct investment with maximum tax optimization.
Photovoltaic systems are business assets. They are purchased, depreciated, and generate taxable income—or they do not. This is where the key tax decision lies: As of the 2022 tax year, systems up to 30 kWp per building unit are fully exempt from income tax (Section 3 No. 72 of the Income Tax Act). That sounds like an advantage—and it is for private homeowners. For investors who wish to utilize the IAB or special depreciation, however, this tax exemption precludes all structuring options.
The fundamental strategic decision is this: tax-exempt simplicity or tax-liable flexibility? Investors or companies that opt for a system larger than 30 kWp—such as an open-field or commercial rooftop system— gain access to tools that can significantly reduce the effective upfront costs.
2. Capital Expenditure Allowance (CEA): Save on taxes before making a purchase
Under Section 7g(1) of the German Income Tax Act (EStG), the IAB allows 50% of planned investment costs to be deducted from taxable income in the year prior to the purchase—up to a maximum of €200,000 per business. Requirements: taxable income of €200,000 or less in the previous year, 90% business use, and the investment must be made within three years. If the investment is not made, interest on arrears of 1.8% per annum is payable pursuant to Section 233a of the German Fiscal Code (AO).
The investment deduction under Section 7g(1)–(4) of the German Income Tax Act (EStG) allows 50% of the planned net acquisition costs of a solar power system to be deducted from taxable income in the year prior to the investment—before a single euro has been spent. The maximum investment deduction amount is 200,000 euros per business.
For tax purposes, PV systems are considered movable business equipment (R 7.1(3) EStR) – eligible for the IAB, even if permanently mounted on a roof. Exception: In-roof systems, which are classified as part of the building structure, are not eligible for the IAB.
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), as amended by the 2020 Annual Tax Act (JStG))
Commercial use: At least 90% of the system’s output must be used for commercial purposes—which is not an issue for systems that feed all their output into the grid
Investment period: Acquisition must take place within three years of the IAB’s formation (Section 7g(3), first sentence, of the German Income Tax Act (EStG)) – an IAB established in 2025 requires the investment to be made by December 31, 2028, at the latest
Movable asset: A PV system installed on a roof or in an open field meets this criterion
In the year of investment, the IAB is added to the profit (+€50,000), while the acquisition cost is reduced by the same amount (–€50,000, § 7g(2), sentence 3 of the German Income Tax Act (EStG)). The reduced tax base applies to all subsequent depreciation charges.
What happens if no investment is made? The IAB is retroactively dissolved, and the tax assessment is amended. In addition, interest on arrears of 1.8% per year applies (Section 233a AO in conjunction with Section 238(1a) AO; new regulation following the 2021 BVerfG decision—no longer the old 6% rate).
(Source: Section 7g of the Income Tax Act (EStG), gesetze-im-internet.de; Northern Black Forest Chamber of Industry and Commerce (IHK), IAB Section 7g of the Income Tax Act (EStG), as of 2025)
3. Special depreciation under Section 7g of the Income Tax Act: 40% since the enactment of the Growth Opportunities Act
The special depreciation allowance PV 2026 under Section 7g(5) of the German Income Tax Act (EStG) amounts to 40% of the acquisition cost, which may be freely allocated over the first five years. Effective January 1, 2024, the Growth Opportunities Act doubled the rate from 20% to 40%. The special depreciation is deductible in addition to straight-line depreciation (5% per year) and declining-balance depreciation (15% of the remaining book value)—combined, up to 77.5% over two years.
The special depreciation under Section 7g(5) of the Income Tax Act (EStG) allows for an additional deduction in addition to the regular depreciation. Since the Growth Opportunities Act (effective March 28, 2024, Federal Law Gazette I 2024 No. 108), a rate of 40% of the acquisition cost applies to all acquisitions made after December 31, 2023, which may be freely allocated over five years.
Three key features:
The special depreciation is not prorated —if the asset is put into service in December, it qualifies for the full 40% depreciation in the first year
Combination with IAB reduction: The 40% is then calculated based on the reduced acquisition cost
Combination with declining-balance depreciation is expressly permitted (Section 7g(5): “in addition to the depreciation under Section 7(1) or (2)”)
The requirements are the same as those of the IAB: a profit threshold of 200,000 euros, and at least 90% business use in the year of purchase and the following year.
(Source: Federal Law Gazette I 2024 No. 108; Haufe, Photovoltaics, IAB, and Special Depreciation)
4. Straight-line and declining-balance depreciation for PV systems in 2026
The straight-line depreciation rate is 5% per annum over 20 years; the declining-balance depreciation rate is 15% of the remaining book value per year (PV) or 30% (battery storage). The declining balance depreciation under the Immediate Investment Program (Federal Law Gazette 2025 I No. 161) is limited to purchases made between July 1, 2025, and December 31, 2027—a time window that investors should actively plan for before only straight-line depreciation remains.
Straight-line depreciation: The tax depreciation period for PV systems is 20 years (Depreciation Table AV No. 3.1.6, Federal Ministry of Finance letter dated December 15, 2000)—which amounts to 5% per year. Depreciation begins in the month of acquisition and is calculated on a pro-rata basis in the first year.
Declining-balance depreciation (since the Immediate Investment Program): For purchases made between July 1, 2025, and December 31, 2027, declining-balance depreciation is once again available—at three times the straight-line rate, capped at 30%. For PV systems, this amounts to 15% of the remaining book value per year. For battery storage systems (10-year useful life) , the maximum rate of 30% applies . A one-time switch to straight-line depreciation is possible at any time.
The declining balance depreciation method has changed several times in recent years: COVID-19 relief measures (2020–2022: max. 25%), Growth Opportunities Act (April 1–December 31, 2024: max. 20%), gap in the first half of 2025, now the Immediate Investment Program (starting July 1, 2025: max. 30%). The current window is limited until the end of 2027.
(Source: Federal Law Gazette 2025 I No. 161 – Immediate Investment Program; Haufe Tax Check-up 2026)
Tax Optimization at a Glance
€100,000 solar power system · Tax deduction over 2 years · 42% marginal tax rate
Total decrease in profit
77.500 €
Total tax savings (42%)
32.550 €
* Based on a reduced tax base (€50,000) following the IAB reduction · Model calculation; not tax advice · As of March 2026
5. Calculation example: A €100,000 solar power system – what can be claimed as a tax deduction in two years?
With an investment of €100,000 and a marginal tax rate of 42%, a €77,500 reduction in taxable income can be achieved over two years—equivalent to €32,550 in tax savings, or 32.55% of the investment amount. The calculation combines IAB (€50,000), special depreciation in year 2 (€20,000), and declining-balance depreciation in year 2 (€7,500). The example represents a typical 100-kWp commercial system.
This example illustrates the optimal combination for a taxable system (e.g., a 99 kWp ground-mounted system or a commercial rooftop system over 30 kWp, with full feed-in). Assumptions: €100,000 net investment, marginal tax rate of 42%, commissioning in January 2027, operating profit under €200,000.
Year 1 (2026) – IAB Education:
IAB: 50% × €100,000 = €50,000 reduction in profit
Tax savings: €50,000 × 42% = €21,000 – without investing a single euro
Year 2 (2027) – Investment and commissioning:
The IAB addition (+€50,000) and the AK reduction (–€50,000) cancel each other out
New tax base for all depreciation: €50,000
Special depreciation (40%): 40% × €50,000 = –€20,000
Declining-balance depreciation (15%): 15% × €50,000 = –€7,500
Net decrease in profit for Year 2: €27,500
Tax savings: €27,500 × 42% = €11,550
Total results for years 1 and 2:
Total loss: 77,500 euros (77.5% of the investment)
Total tax savings: 32,550 euros (32.55% of the investment amount)
The tax benefit is a cash flow advantage, not a tax exemption—exactly 100,000 euros will be depreciated over 20 years. Our article on PV investment in 2026—"What a system costs, what it delivers"—explains how this tax optimization affects the overall return on a PV investment.
Starting scenario: A 100 kWp commercial PV system costs approximately €100,000
A commercial rooftop photovoltaic system with a capacity of 100 kWp represents a net investment of approximately €101,500, based on current system prices of around €1,015/kWp (Fraunhofer ISE, Q1 2026). The calculation example below, with €100,000 in acquisition costs, thus represents typical entry-level systems for freelancers, doctors, and small-to-medium-sized businesses. The same logic can be scaled proportionally to larger systems—the percentage leverage (50% IAB, 40% special depreciation, 15% declining balance depreciation) remains identical up to the upper limit of €200,000 IAB per business.
(Source: Haufe, IAB and special depreciation; SHBB, special depreciation for commercial PV systems)
6. Sales Tax: Zero Tax Rate and Input Tax Credit
Systems up to 30 kWp have been subject to a zero tax rate since January 1, 2023 (§ 12(3) UStG) — commercial systems over 30 kWp are subject to the standard 19% sales tax with input tax deduction. For a net investment of €200,000, this means an input tax refund of €38,000. The market premium is not subject to VAT (BMF letter dated March 31, 2025), and the small business opt-out commitment period is five years (Section 19 of the German Value Added Tax Act).
Effective January 1, 2023, pursuant to Section 12(3) of the German Value-Added Tax Act (UStG), a zero tax rate (0% VAT) applies to the supply and installation of PV systems, including battery storage. The 30-kWp limit is a simplification rule: below this threshold, the zero tax rate applies automatically; above it, the zero tax rate also applies, provided the buildings are residential, public, or non-profit.
Ground-mounted systems and non-subsidized commercial buildings over 30 kWp are subject to the standard tax rate of 19% —which is an advantage for investors: the full input tax from the purchase is refunded. For a net purchase price of 200,000 euros, this amounts to a 38,000-euro input tax refund. A 19% VAT rate then applies to feed-in tariffs and direct sales revenue; the market premium is a non-taxable subsidy (BMF letter dated March 31, 2025).
The small business tax regime was reformed effective January 1, 2025 (JStG 2024): the prior-year threshold is €25,000, and the current-year threshold is €100,000. The waiver is binding for at least 5 years. The small business regulation is often worthwhile for zero-VAT systems; for 19% VAT systems, it is almost never worthwhile.
(Source: BMF FAQ on Photovoltaic Systems, bundesfinanzministerium.de; BMF Letter dated February 27, 2023, BStBl 2023 I, p. 351)
7. Tax Exemption Under Section 3(72) of the Income Tax Act – The Critical Borderline Case for Investors
Section 3(72) of the German Income Tax Act (EStG) exempts PV systems up to 30 kWp per building unit from income tax—but at the same time excludes investment allowances (IAB) and special depreciation (Sonder-AfA). For investors with multiple systems, the individual cap of 100 kWp in total applies. The borderline case: Anyone planning 30 kWp plus storage may lose the entire tax benefit—or gain tax-free income without loss carryforward.
Since the 2022 tax year, income from PV systems up to 30 kWp per residential or commercial unit has been fully exempt from income tax (2022 Annual Tax Act, retroactive). The per-person cap is 100 kWp in total—an exemption limit, not a tax-free allowance: if this limit is exceeded, the exemption is completely forfeited. The regulation has applied uniformly to all building types since the 2024 Annual Tax Act, effective January 1, 2025.
The key issue for investors: Tax-exempt income completely precludes the use of IAB and special depreciation (§ 3c(1) EStG). Those subject to § 3 No. 72 EStG cannot determine their taxable income and therefore cannot utilize depreciation methods. The tax exemption is mandatory—there is no opt-out.
This provides a clear dividing line for the investment decision:
Systems ≤ 30 kWp per unit: Tax-free, no red tape, no flexibility
System > 30 kWp or ground-mounted: Taxable, full access to IAB + special depreciation + declining-balance depreciation
Our article on the Logic Energy investor model explains how the model is structured with investments in the taxable sector and what returns are typically achieved. The tax aspect is part of the total return—alongside the 2026 EEG feed-in tariff and direct sales revenue.
8. What you must discuss with your tax advisor
The IAB deadline, the small business opt-out, the trade tax assessment rate, and GmbH structuring are four issues that can make a difference of tens of thousands of euros. No online guide can replace personalized advice—but if you go to a tax advisor with a specific list of questions, you’ll save on consulting hours and make better decisions. Upon request, Logic Energy can provide the key technical and financial data for your appointment.
Tax planning for PV systems involves planning before the investment—not retroactively. Five points should be clarified before any purchase:
Tax status of the investment: Does it fall under Section 3(72) of the Income Tax Act (tax-exempt), or is it taxable? The entire strategy depends on this.
IAB Timeline: Take advantage of up to a three-year lead time, ensure the break-even point is reached in the year of deduction, and document the investment plan in writing.
Start-up date: The beginning of the year is advantageous for regular depreciation (full-year depreciation). Special depreciation is not prorated—December ensures 40% special depreciation with only 1/12 of regular depreciation.
Choosing a legal structure: Sole proprietorship (simple, business tax exemption of €24,500), GbR (multiple investors), GmbH (retained earnings advantage) – each structure has its own tax implications.
VAT Strategy: Zero Rate or Standard Taxation? Weigh the 5-year commitment under standard taxation against the input tax refund.
Our overview, “PV Investment: Getting Direct Investment Right,” highlights other factors to consider when making a PV investment—beyond just taxes .
The tax implications of a solar investment is complex, but can be highly effective with the right planning. Learn more about PV investments now →
Tax incentives only have their full effect if the underlying investment is financially sound. Logic Energy prepares a customized financial analysis for every prospective client based on actual installation costs, current EEG feed-in tariffs, and your marketing strategy—free of charge and with no obligation. These figures serve as the foundation for you to work with your tax advisor to develop the optimal tax structure. Contact us →
For more information about solar power systems for industrial facilities, please see our guide.
Disclaimer: This article is intended solely for general informational purposes and does not constitute tax, legal, or investment advice. All examples are simplified model calculations and do not guarantee completeness or tax accuracy in your specific situation. Tax laws and Federal Ministry of Finance (BMF) circulars are subject to change. For your individual tax planning, please consult a licensed tax advisor. All information is provided without warranty. As of March 2026.
9. FAQ
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Yes—but only for taxable systems over 30 kWp. For these, an investment tax credit (50% of the acquisition cost upfront), special depreciation (40% starting in 2024), and declining-balance depreciation (15% starting in July 2025) are available. Systems up to 30 kWp have been exempt from income tax since 2022 (Section 3 No. 72 of the Income Tax Act)—but in that case, all depreciation options are eliminated.
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The IAB (Section 7g of the German Income Tax Act) allows 50% of the planned PV system acquisition costs—up to a maximum of 200,000 euros—to be deducted from profits in the year prior to the investment. Requirements: Profit threshold of 200,000 euros, at least 90% business use, and the investment must be made within 3 years. If the investment is not made: Reversal plus 1.8% interest on arrears per annum.
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Since the enactment of the Growth Opportunities Act (March 28, 2024, Federal Law Gazette I 2024 No. 108), the special depreciation under Section 7g(5) of the Income Tax Act (EStG) amounts to 40% of the acquisition cost—which may be freely allocated over five years—for all acquisitions made on or after January 1, 2024. Combination with IAB and declining-balance depreciation is permitted. The tax base is the acquisition cost base, reduced by IAB if applicable.
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The Immediate Investment Program (July 14, 2025, Federal Law Gazette 2025 I No. 161) introduced a declining balance depreciation rate of up to 30% (3-year straight-line method) for acquisitions made between July 1, 2025, and December 31, 2027. For PV systems with a 20-year useful life, this amounts to 15% of the residual book value. For battery storage systems (10 years), the maximum rate of 30% applies.
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Yes. Effective January 1, 2023, pursuant to Section 12(3) of the German Value-Added Tax Act (UStG), a zero tax rate applies to the supply and installation of PV systems up to 30 kWp—with no time limit. For larger systems installed on non-eligible commercial properties or open spaces, a 19% VAT rate applies, which allows for a full input tax deduction. (Source: BMF letter dated February 27, 2023)
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Yes, for income from business operations (Section 15 of the Income Tax Act). Sole proprietors and partnerships are entitled to an exemption of 24,500 euros (Section 11(1)(1) of the Trade Tax Act). Under § 35 EStG, trade tax is credited against income tax—up to a rate of 400%, there is effectively no double taxation. Investments under § 3 No. 72 EStG are exempt from trade tax.
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Yes. In the previous year, include the IAB (–50% of the acquisition cost); in the investment year, add the IAB and reduce the acquisition cost (neutral), then apply the special depreciation (40% of the reduced acquisition cost) plus declining-balance depreciation (15%). With a 100,000-euro investment and a 42% marginal tax rate, this results in tax savings of over 30,000 euros over two years. (Source: Haufe; SHBB)
10. Sources
§ 7g of the Income Tax Act – Investment Deductions and Special Depreciation Allowances
Growth Opportunities Act (Federal Law Gazette I 2024 No. 108)
Immediate Investment Program (Federal Law Gazette 2025 I No. 161)
Chamber of Industry and Commerce (IHK) Northern Black Forest – IAB § 7g of the Income Tax Act (EStG)
BMF EStH 2024, Appendix 27a (Section 3(72) of the Income Tax Act)
All information is provided without guarantee. As of March 2026. Legislation and Federal Ministry of Finance (BMF) letters are subject to change.
