In most cases, your expenses are fully deductible in the same tax year. When you buy expensive equipment or software, you cannot deduct the entire amount immediately.
The equipment is assumed to reduce its value over time due to wear and tear. The steady reduction in value of the product is called depreciation.
What is the threshold for applying depreciation?
Any equipment that costs more than 800€ excluding VAT must be depreciated over time.
If you are a small business owner (Kleinunternehmer), the 800€ limit is for the total amount including VAT.
It is worth noting that you can deduct the VAT paid immediately and don't need to depreciate it over time.
How to depreciate your expenses?
Each equipment you own has a useful lifetime, which is the expected number of years for which the equipment will be usable.
Example: If you bought a laptop for 900€, and its useful life is known to be 3 years, you can deduct 300€ worth of expenses every year.
Products useful lifetime
The official specification of useful lifetime for different products could be found here.
Common equipment for self employed
Laptop - 3 years
Camera - 7 years
Phone - 5 years
Office furniture - 13 years
Software license - 3 years
What about software?
Purchasing software with a one-time license fee
Software bought with a one-time license fee, such as Microsoft Office, is treated similarly to work equipment. Expensive software over 800€ is assumed to reduce its value over a period of 3 years.
Purchasing software with a monthly subscription
Software with a monthly subscription is immediately tax deductible, even if the total costs exceed 800€ per year. Examples of this includes Dropbox, Zoom, Mailchimp, Shopify, and Sorted.
Sorted tax guides are provided without liability and do not replace a tax advisor.
To get an accurate answer for your specific case, please consult a tax advisor.
You can always ask one of tax advisors on the Sorted platform.
Looking for a solution to your bookkeeping? Sorted helps you to keep track of your expenses and automatically calculates the depreciation.