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Depreciation: linear, declining and residual value explained
Written by Ilias3 min read
If you buy an expensive business asset, you may not deduct it as costs all at once. Instead you spread the costs over the years you use it. That's called depreciation. It sounds technical, but the principle is logical. This article explains the methods.
What is depreciation?
Depreciation means spreading the cost of a business asset over the years you use it. A laptop of 1,500 euros you use for five years isn't deducted all at once, but spread over those five years. This way your costs better match the actual use and the loss of value.
What is linear depreciation?
With linear depreciation you deduct the same amount each year. You take the purchase value, subtract the residual value, and divide that by the number of years of use. This is the most used and simplest method, and is widely accepted by the tax authorities.
What is declining depreciation and residual value?
With declining depreciation you depreciate more in the first years and less in later years, because many business assets lose value faster at the start. The residual value is the value the asset still has at the end of the period of use; you don't deduct that, because you keep it.
What should you watch out for?
Business assets under 450 euros don't need to be depreciated; you can usually deduct them directly as costs. For most entrepreneurs linear depreciation is the handiest and clearest. If in doubt about the useful life or residual value, get advice so you depreciate correctly.
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
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