Investitionsabzugsbetrag: all §7g EStG requirements — and who can use it

An Investitionsabzugsbetrag under §7g EStG can be claimed by anyone who runs — or holds a stake in — a business generating business income, whose profit in the year of the deduction does not exceed €200,000, and who plans to acquire a depreciable, movable fixed asset within the following three financial years. That is the one-sentence answer. Behind it sit requirements on which the IAB can fail in practice — and a question most German tax guides dispatch with a curt "employees cannot use the IAB", even though the complete answer is different.

This article works through the requirements of §7g EStG systematically — as of July 2026, including the most recent Federal Fiscal Court (BFH) case law on the profit ceiling. How the IAB plays out in euros is shown in the worked example in IAB under §7g EStG: example calculation for battery storage; where it sits among the other legal tax levers is set out in Legally reducing your tax: the most effective strategies.

Who can claim an Investitionsabzugsbetrag?

The IAB requires a business that generates profit-type income — income from trade, self-employment, or agriculture and forestry. It can therefore be claimed by sole proprietors, freelancers, partnerships (GbR, KG, GmbH & Co. KG — there at the level of the partnership) and corporations such as a GmbH. Since the 2020 Annual Tax Act (Jahressteuergesetz 2020) the method of profit determination no longer matters: cash-basis accounting and full balance-sheet accounting are treated equally, under one uniform profit ceiling.

Conversely: anyone earning only surplus-type income cannot claim an IAB. That covers employment income as well as private rental income or capital income. An employee without a business of their own does not meet the basic requirement of §7g — not directly. The complete picture for that constellation follows in the next section, because this is exactly where most write-ups stop too early.

Can I use the IAB as an employee or private individual?

Yes — as soon as you create a business for yourself. The IAB does not attach to the employment status "employee"; it attaches to a business with profit-type income — and that access can be created structurally by anyone. The most direct route: you found a business of your own, typically a sole proprietorship (Einzelunternehmen), set up to acquire and operate a specific asset — say, a PV installation or a battery storage system. The IAB then arises in that business, and the negative commercial income offsets your salary in your personal income-tax assessment — with full leverage at the top marginal rate. What matters is that the business is set up in earnest: with an intention to make a profit and a solid, documented investment project. A "tax-saving trade" with no real project behind it will not survive scrutiny by the tax office.

The second route runs through an existing structure: you acquire a co-entrepreneur stake (Mitunternehmeranteil) in a commercially active partnership — typically as a limited partner of a GmbH & Co. KG holding a specific energy project. This too generates your own commercial income; the IAB is claimed at the level of the partnership, and its effect arrives proportionately in your personal assessment — against your full marginal rate.

This is precisely the mechanism behind direct investments in battery storage or photovoltaic installations: for single investments the project is typically held in your own sole proprietorship, for larger structures through a GmbH & Co. KG — in both cases IAB, Sonder-AfA and regular depreciation work against your other income. Which routes into battery storage exist at all is laid out in Investing in battery storage: the options at a glance; how much equity is actually tied up after the tax refund is calculated in How much equity is actually required?.

Special case: IAB after a severance payment

Access through an investment is particularly relevant for employees facing a one-off income spike — such as a severance payment (Abfindung) after leaving a company. The severance hits the top marginal rate in the year it is received; an IAB claimed in the same year in a business of your own or through a commercial investment counteracts that directly. Whether and how this can be combined with the one-fifth rule of §34 EStG depends on the individual case and belongs firmly in the hands of your tax advisor — but the lever itself is one of the very few available at this order of magnitude in such a situation.

How high may the profit be? The €200,000 ceiling

The profit of the business must not exceed €200,000 in the financial year in which the IAB is claimed (§7g (1) sentence 2 no. 1 EStG). The ceiling applies uniformly to all profit-type income and regardless of whether profit is determined by cash-basis accounting or a balance sheet. What counts is the profit before deducting the IAB itself — so the IAB cannot "rescue" its own ceiling. And it applies per business: anyone running several businesses tests each ceiling separately, and for a partnership the profit of the entire company counts, including any special business income of the partners — not your personal share.

For investment structures the ceiling is well manageable in practice: a project company set up specifically for one investment starts without legacy profits — and profit development over the holding period can be planned. That is one of the reasons direct investments are typically structured as a standalone GmbH & Co. KG.

Which assets are eligible?

Eligible are depreciable, movable fixed assets — machinery, vehicles, technical installations. Since the 2020 Annual Tax Act this explicitly includes assets that are rented out. New or used makes no difference. Not eligible, by contrast, are buildings, intangible assets (such as software licences or shareholdings as such) and current assets.

Two in-use requirements come on top. First, the asset must remain in a domestic permanent establishment until the end of the financial year following the year of acquisition. Second, during that period it must be used exclusively or almost exclusively — the tax authorities draw the line at 90 % — for business purposes, or be rented out.

Large-scale battery storage systems and PV installations fit this profile cleanly: for tax purposes they are classified as operating fixtures (Betriebsvorrichtungen) and thus as movable assets (the official depreciation table lists energy storage at a ten-year useful life) — and a storage system continuously marketed on day-ahead, intraday and balancing markets via direct marketing is 100 % business-used. Care is needed where self-consumption shares exist — there the 90 % threshold wants active monitoring.

How large is the IAB — and how long do I have to invest?

The IAB amounts to up to 50 % of the expected acquisition or production cost. It is capped at €200,000 in total per business — measured across the year of the deduction and the three preceding financial years, to the extent claimed amounts have not yet been settled by investment or reversed (§7g (1) sentence 4 EStG). For the investment itself, three financial years after the year of the deduction remain; the pandemic-related deadline extensions only concerned legacy IABs from 2017–2019 and no longer matter for amounts claimed today.

After the acquisition, two further levers with their own conditions follow on. The Sonder-AfA under §7g (5) EStG (40 % for acquisitions since 2024) requires that the €200,000 profit ceiling was met in the year before the acquisition. The declining-balance depreciation under §7 (2) EStG (up to 30 % for acquisitions between July 2025 and the end of 2027) can be combined with it. Which is the better choice when is compared in Sonder-AfA §7g (5) vs. declining-balance AfA §7 (2): which combination, when?. Incidentally, the 2025 investment programme (Investitionssofortprogramm) left the wording of §7g untouched — percentages, profit ceiling and deadlines apply unchanged.

What happens if I don't invest?

If the investment has not happened by the end of the third following financial year, the IAB is reversed — retroactively in the year it was claimed, even if that tax assessment has long become final (§7g (3) EStG contains its own correction rule for this). The resulting back tax bears interest under §233a AO: 0.15 % per full month, i.e. 1.8 % per year. The legislator reviewed this rate as scheduled on 1 January 2026 and kept it — the 6 % still quoted in places has not applied since 2019.

With an IAB of €150,000 and three years of interest accrual, roughly €8,000 of interest comes on top of the regular back tax. The practical consequence: the IAB is not a tool for "save tax first, decide later". Anyone claiming it should have a serious, documented investment intent — ideally a specific project with a reliable timeline to closing.

How does the IAB work in a GmbH & Co. KG investment?

For partnerships, the partnership takes the place of the taxpayer for §7g purposes (§7g (7) sentence 1 EStG). Concretely: the GmbH & Co. KG claims the IAB, the KG must meet the profit ceiling (measured across joint partnership assets and special business assets together), and the KG makes the eligible investment. As a limited partner you participate through your profit allocation — the tax effect lands proportionately in your personal assessment.

Since the 2020 Annual Tax Act a sphere separation applies: an IAB deducted from the joint partnership profit can only be settled by investments of the partnership itself — and an IAB claimed in a partner's special business assets only by that partner's own investment in their special business assets (§7g (7) sentences 2 and 3 EStG). For a typical project investment this is uncritical, because the partnership invests anyway: it is set up, claims the IAB at partnership level and acquires the storage system or PV installation itself as planned. The rule only bites for arrangements that try to spread deduction and investment across different asset spheres — a matter for the tax advisor, not for the standard structure.

Because the profit ceiling and the €200,000 cap apply per business, the test starts afresh with every new project company — and the IAB can be claimed anew each year. How that compounds into a diversified investment portfolio over several years is shown in Using the investment deduction every year: building a portfolio over multiple years; the costs involved in a direct investment are laid open in Transparent costs: which fees a direct investment involves — and which ones are hidden.

Checklist: all IAB requirements at a glance

• A business with profit-type income — as a (possibly newly founded) sole proprietor, freelancer, corporation, or via a co-entrepreneur stake (e.g. a GmbH & Co. KG investment).
• Profit of the business in the year of the deduction at most €200,000 — before the IAB, after off-balance-sheet adjustments, and for partnerships at the level of the entire company.
• Planned asset: depreciable, movable, fixed asset — new or used.
• Use: at least 90 % business use or rented out, kept in a domestic permanent establishment until the end of the financial year following acquisition.
• Amount: up to 50 % of the expected acquisition cost, max. €200,000 in total per business.
• Investment within three financial years of the deduction — otherwise reversal with 1.8 % interest per year.
• A serious, documented investment intent — ideally a specific project with a timeline.

Whether a direct investment with IAB fits your income and tax situation — and what the timeline to claiming it in the current tax year looks like — is something we clarify in a no-obligation initial consultation, together with your tax advisor if you wish.