In fixed assets, the impairment must be determined for tax purposes. This impairment is called depreciation for wear. The AfA is characterized by the income tax law. Although it is a form of depreciation , which is based on tax law, but there are different variants compared to the business depreciation. Depreciation, which is scheduled according to commercial law, is called deduction for wear. In the case of unscheduled commercial depreciation on fixed assets, a tax deduction for extraordinary wear and tear (AfaA) is used. Furthermore, there is the unscheduled amortization of current assets under commercial law, which is referred to as partial value depreciation and the collective depreciation (since 2008) according to § 6 Abs.2a EStG.
According to two factors , the deduction for wear depends on the amount of the production or acquisition costs and after the normal period of use.
The deduction can be determined in various ways. On the one hand the depreciation in constant annual amounts, the linear depreciation. Here, the annual amounts remain constant. The resulting acquisition costs of the asset to be depreciated are distributed evenly over the years of use. As a result, the amount to be depreciated annually is the same. Here you have to differentiate between depreciation percentage and depreciation amount. The useful life is prescribed by law.
There is also the depreciation after falling annual amounts, the declining balance depreciation. From the tax law, only the geometrical degressive deduction is allowed. This can be applied to movable assets from fixed assets, which are listed in a special directory. The only exception here is the depreciation of rented dwellings, because the degressive depreciation may also be applied here if the building application is submitted before 01.01.2006 and the legally effective notary contract has also been concluded before 01.01.2006. In the case of the declining-balance depreciation, a fixed percentage is deducted from the previous year’s book value. This percentage may not be more than 2.5 times the depreciation rate of the linear depreciation and may not exceed 25 per cent.
Intangible goods may not be depreciated in this way, but only after a linear or unscheduled deduction.
An AfA is also permitted for used goods. These are amortized over the remaining useful life. If the usable assets do not exceed € 150, they are considered low value assets and will be deducted accordingly. The remaining useful life of used cars must be estimated according to the law. According to the AfA table, 3 year old vehicles have a remaining useful life of 6 years.