Permissible depreciation for self-employment

How much can I actually depreciate in my business? Permissible depreciations are of central importance in self-employed work because they result in many tax consequences.

Depreciations account for scheduled or unscheduled impairments of assets (see blog post). This leads to a profit-reducing reduction in the income tax value of the asset in self-employed work.

What is allowed?

‍Depreciations of assets are only permissible if they are business-related (Art. 28 Para. 1 DBG). If the depreciations cannot be justified for business reasons - usually too much has been depreciated - the taxable profit of the company is reduced. Also, depreciations can only be accounted for in the period in which the impairment actually occurred (so-called principle of periodicity). Only business assets can be depreciated; private assets do not allow for depreciations. Only properly recorded depreciations are recognized for tax purposes. Allowed is the direct method (booking entry: Depreciations / Machines) or the indirect booking via a value allowance account (booking entry: Depreciations / WB Machines).‍

Tax authority information sheets

‍Whether a depreciation is justified or not is very difficult to assess because the assessment depends on the estimated useful life and the residual value of the depreciated item. To standardize and simplify, the tax authorities have issued information sheets, which set the depreciation rates for fixed assets (e.g. Information Sheet A 1995 - Depreciations on fixed assets of business enterprises). The depreciations are considered business-related as long as they stay within the depreciation rates of the information sheets. Recognized depreciation methods include straight-line depreciation from the acquisition value and declining balance depreciation from the book value (see blog post).

If depreciations are higher than those recognized for tax purposes (over-depreciations), the taxable income or earnings are corrected. In this case, the excessively depreciated amount is added to the balance of the profit and loss account and to the capital (addition method).

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