Asset Depreciation for OSVČ: How It Works and When It Pays Off
When you buy expensive equipment for your business as a sole trader — a car, computer, machine, or furniture — you can't deduct the full amount from your taxes in the year of purchase. If the acquisition price exceeds the legally defined threshold, you must spread the expense over several years through what's known as depreciation. The system looks complicated at first glance, but once you understand the basic principles, you'll find it's a powerful tool for tax optimisation.
In this article, we'll walk through in detail how tax depreciation works, what depreciation groups and methods exist, and show you through concrete examples when depreciation pays off — and when it doesn't. Everything is based on Act No. 586/1992 Coll. on Income Taxes, as currently in force for 2026.
The Basic Principle of Depreciation
Depreciation is the gradual inclusion of an asset's acquisition cost in tax-deductible expenses. Instead of deducting the full amount at once, you deduct a portion each year. This "spreads" the cost across multiple tax periods, which better reflects the actual wear and tear of the asset.
Key threshold for 2026: Tangible assets must be depreciated if their acquisition cost exceeds 80,000 CZK and their useful life is longer than 1 year. Assets costing up to 80,000 CZK (minor tangible assets) can be expensed in full in the year of acquisition.
Who Depreciation Applies To
Depreciation applies only to OSVČ who maintain tax records and claim actual expenses. If you claim flat-rate expenses as a percentage of income (60%, 80%, etc.), you don't need to deal with depreciation — it's already factored into the flat rate.
Conditions for Depreciation
📋When You Can Depreciate an Asset
- The asset is part of your business assets — you must include it in your business assets on the date of acquisition (recorded on an asset card in your tax records).
- The acquisition cost exceeds 80,000 CZK — below this threshold, it counts as a minor tangible asset and can be expensed in full at once.
- The useful life exceeds 1 year — the asset must have an operational and technical function lasting more than one year.
- You are the owner of the asset — or you are authorised to depreciate it (for example, a tenant with the landlord's consent for technical improvements).
The Six Depreciation Groups
The Income Tax Act divides tangible assets into six depreciation groups based on asset type. Group membership determines the depreciation period.
📊Overview of Depreciation Groups
Examples of Asset Classification for OSVČ
For most sole traders, groups 1 and 2 are the most relevant:
📊Where to Classify Common OSVČ Assets
Where to Find the Exact Classification
A detailed list of assets and their depreciation group assignments can be found in Annex No. 1 to Act No. 586/1992 Coll. on Income Taxes. If you're unsure which group your asset belongs to, we recommend consulting a tax adviser — incorrect classification can lead to issues during a tax authority audit.
Straight-Line (Linear) Depreciation
Straight-line depreciation is the simpler option, where you depreciate roughly the same amount each year (with the exception of the first year, which has a lower rate).
Rates for Straight-Line Depreciation
📊Maximum Annual Depreciation Rates — Straight-Line Method
Calculating Straight-Line Depreciation
The straight-line depreciation calculation is straightforward:
Annual depreciation = Acquisition cost × Depreciation rate / 100
Example: Straight-Line Depreciation on a Laptop (Group 1)
Scenario: An OSVČ purchased a laptop for 95,000 CZK. It is classified in depreciation group 1 (3 years).
| Year | Rate | Calculation | Depreciation | Book Value | |------|------|-------------|--------------|------------| | Year 1 | 20% | 95,000 × 20% | 19,000 CZK | 76,000 CZK | | Year 2 | 40% | 95,000 × 40% | 38,000 CZK | 38,000 CZK | | Year 3 | 40% | 95,000 × 40% | 38,000 CZK | 0 CZK | | Total | | | 95,000 CZK | |
Over 3 years, the OSVČ fully depreciates the acquisition cost of the laptop.
Example: Straight-Line Depreciation on a Car (Group 2)
Scenario: An OSVČ purchased a passenger car for 450,000 CZK. It is classified in depreciation group 2 (5 years).
| Year | Rate | Calculation | Depreciation | Book Value | |------|------|-------------|--------------|------------| | Year 1 | 11% | 450,000 × 11% | 49,500 CZK | 400,500 CZK | | Year 2 | 22.25% | 450,000 × 22.25% | 100,125 CZK | 300,375 CZK | | Year 3 | 22.25% | 450,000 × 22.25% | 100,125 CZK | 200,250 CZK | | Year 4 | 22.25% | 450,000 × 22.25% | 100,125 CZK | 100,125 CZK | | Year 5 | 22.25% | 450,000 × 22.25% | 100,125 CZK | 0 CZK | | Total | | | 450,000 CZK | |
Accelerated (Declining Balance) Depreciation
Accelerated depreciation allows you to write off a larger portion of the asset's acquisition cost in the early years. Depreciation amounts decrease over time. This method is advantageous if you want to reduce your tax base as quickly as possible.
Coefficients for Accelerated Depreciation
📊Coefficients for Accelerated Depreciation
Formulas for Accelerated Depreciation
- Year 1: Depreciation = Acquisition cost / Year 1 coefficient
- Subsequent years: Depreciation = (2 × Book value) / (Subsequent years coefficient − Number of years already depreciated)
Example: Accelerated Depreciation on a Car (Group 2)
Scenario: An OSVČ purchased a car for 450,000 CZK and chooses accelerated depreciation (Group 2, coefficients 5 and 6).
| Year | Calculation | Depreciation | Book Value | |------|-------------|--------------|------------| | Year 1 | 450,000 / 5 | 90,000 CZK | 360,000 CZK | | Year 2 | (2 × 360,000) / (6 − 1) | 144,000 CZK | 216,000 CZK | | Year 3 | (2 × 216,000) / (6 − 2) | 108,000 CZK | 108,000 CZK | | Year 4 | (2 × 108,000) / (6 − 3) | 72,000 CZK | 36,000 CZK | | Year 5 | (2 × 36,000) / (6 − 4) | 36,000 CZK | 0 CZK | | Total | | 450,000 CZK | |
Straight-Line vs. Accelerated Depreciation: Which to Choose
Choosing between straight-line and accelerated depreciation is one of the key tax decisions you'll make. Once chosen, the method cannot be changed during the depreciation period.
📊Comparison of Straight-Line and Accelerated Depreciation
Comparison: Car Worth 450,000 CZK — Straight-Line vs. Accelerated
Depreciation over the first 2 years:
| Method | Year 1 | Year 2 | Total over 2 years | |--------|--------|--------|---------------------| | Straight-line | 49,500 CZK | 100,125 CZK | 149,625 CZK | | Accelerated | 90,000 CZK | 144,000 CZK | 234,000 CZK | | Difference | +40,500 CZK | +43,875 CZK | +84,375 CZK |
At a tax rate of 15%, this means accelerated depreciation saves you approximately 12,656 CZK more in tax over the first 2 years compared to straight-line. You save the money sooner — the total depreciation over 5 years is the same either way.
Which Method to Choose and When
Choose accelerated depreciation if:
- You have high income in the current years and want to reduce your tax base as quickly as possible.
- You expect your income to be lower in future years.
- The asset genuinely loses value quickly (electronics, IT equipment).
Choose straight-line depreciation if:
- You want stable and predictable tax deductions each year.
- Your income is roughly constant.
- You're depreciating the asset over a long period (buildings, structures).
Extraordinary Depreciation for Zero-Emission Vehicles
Since 2024, a special extraordinary depreciation regime has been available for zero-emission vehicles (electric vehicles, hydrogen vehicles). This regime applies to vehicles acquired between 1 January 2024 and 31 December 2028.
Extraordinary Depreciation for Zero-Emission Vehicles
A zero-emission vehicle can be fully depreciated in just 24 months:
- First 12 months: you depreciate 60% of the acquisition cost
- Next 12 months: you depreciate 40% of the acquisition cost
This regime is significantly more favourable than standard depreciation under Group 2 (5 years). Depreciation is calculated on a monthly basis, not annually.
Example: Extraordinary Depreciation on an Electric Vehicle
Scenario: An OSVČ purchased an electric vehicle for 800,000 CZK in March 2026.
| Period | Calculation | Depreciation | Monthly Amount | |--------|-------------|--------------|----------------| | March 2026 – February 2027 | 800,000 × 60% | 480,000 CZK | 40,000 CZK | | March 2027 – February 2028 | 800,000 × 40% | 320,000 CZK | 26,667 CZK | | Total | | 800,000 CZK | |
In the 2026 tax return (10 months: March–December): depreciation = 10 × 40,000 = 400,000 CZK
Compared to standard straight-line depreciation (Year 1 = 11% = 88,000 CZK), the tax saving in the first year is substantially higher.
Minor Tangible Assets — Full Expensing in One Go
Assets with an acquisition cost of up to 80,000 CZK do not need to be depreciated. You can include them in your tax-deductible expenses in full in the year of acquisition.
The 80,000 CZK Threshold for 2026
The current threshold is 80,000 CZK. A proposed amendment to the Income Tax Act would raise this limit to 100,000 CZK, but this change has not yet been approved. For 2026, use the currently valid threshold of 80,000 CZK.
Example: If you buy a laptop for 35,000 CZK, you can expense the full amount in the year of purchase. If you buy a laptop for 95,000 CZK, you must depreciate it over 3 years (depreciation group 1).
Suspending Depreciation
One of the advantages of tax depreciation is the ability to suspend it. This is useful in years when your income is low or you're running at a loss — in such cases, the depreciation deduction would bring no real tax saving.
📋Rules for Suspending Depreciation
- You can suspend at any time — in any year of the depreciation period (years don't need to be consecutive).
- Partial suspension is not allowed — in a given year, you either claim the full depreciation or none at all.
- The depreciation period is extended — suspension pushes the depreciation timeline back by as many years as you suspended.
- No need to report the suspension — simply don't include the depreciation in your tax return for that year.
- You continue with the same method after suspension — you cannot switch from straight-line to accelerated or vice versa.
Example: Suspending Depreciation in a Low-Income Year
Scenario: An OSVČ is depreciating a car worth 450,000 CZK using the accelerated method. In year 3, their income is very low (tax base close to zero).
| Year | Depreciation | Claimed? | |------|--------------|----------| | Year 1 | 90,000 CZK | Yes | | Year 2 | 144,000 CZK | Yes | | Year 3 | 108,000 CZK | No — suspended | | Year 4 | 108,000 CZK | Yes (Year 3 depreciation resumed) | | Year 5 | 72,000 CZK | Yes | | Year 6 | 36,000 CZK | Yes |
The car will be depreciated over 6 years instead of 5. The total amount depreciated is the same (450,000 CZK), but the OSVČ applied the deduction in a year where it had a real tax impact.
Technical Improvements to Assets
If you make modifications or improvements to a depreciable asset that collectively exceed 80,000 CZK in a given tax period, this constitutes a technical improvement. It is not treated as a repair, but as an increase in the asset's value.
What Is and Isn't a Technical Improvement
📊Repair vs. Technical Improvement
Watch Out for the 80,000 CZK Threshold
A technical improvement means expenditure on completed extensions, additions, structural modifications, reconstructions, and modernisations of an asset, provided they exceed 80,000 CZK in total for a single asset in a given tax period. If the total amount is below this threshold, you can treat it as a standard tax-deductible expense (i.e. a repair).
Removing an Asset from Business Assets
When removing an asset from your business assets, you need to handle the book value correctly:
Selling an Asset
The book value is a tax-deductible expense (up to the amount of the sale proceeds). The sale proceeds are taxed as business income.
Writing Off an Asset
The book value is fully tax-deductible. You must have a write-off (disposal) record.
Transfer to Personal Use
The book value is not tax-deductible. The asset "leaves" the business assets at book value, but you cannot deduct it.
Example: Selling a Depreciated Car
Scenario: An OSVČ sells a car after 3 years of accelerated depreciation (acquisition cost 450,000 CZK).
- Depreciation over 3 years: 90,000 + 144,000 + 108,000 = 342,000 CZK
- Book value: 450,000 − 342,000 = 108,000 CZK
- Sale price: 250,000 CZK
Tax implications:
- Sale proceeds: 250,000 CZK (taxable income)
- Book value as a deductible expense: 108,000 CZK (tax-deductible)
- Tax base from the sale: 250,000 − 108,000 = 142,000 CZK
- Tax at 15%: 21,300 CZK
In the year of sale, you can only claim half a year's depreciation (half-year depreciation).
Depreciation and the Flat-Rate Tax Regime
If you're on the flat-rate tax (paušální daň) regime, you don't need to deal with depreciation. The flat-rate tax covers fixed monthly payments towards income tax, social insurance, and health insurance. You don't claim any expenses, and that includes depreciation.
Switching from Flat-Rate Tax to Tax Records
If you're switching from the flat-rate tax regime back to tax records and you have assets acquired during the flat-rate period, you can start depreciating them. The acquisition cost serves as the depreciable base, and you start from year 1 (as if you were just entering the asset into your business assets).
Frequently Asked Questions (FAQ)
Do I have to depreciate, or can I expense the full amount at once?
If the acquisition cost exceeds 80,000 CZK and the asset has a useful life of more than 1 year, you must depreciate it. Full expensing in one go is only available for minor assets costing up to 80,000 CZK.
Can I change the depreciation method part-way through?
No. Once you choose a method (straight-line or accelerated), it cannot be changed during the depreciation of that specific asset. You choose the method with the first depreciation entry and it applies for the entire period.
What if I acquired an asset in December of the first year?
You still claim depreciation for the full first year. With annual depreciation, it doesn't matter which month you acquired the asset — the first year's depreciation is always the full amount (the exception being monthly extraordinary depreciation for zero-emission vehicles).
Can I depreciate an asset I bought before starting my business?
Yes, if you include it in your business assets. The depreciable base will be the reproduction acquisition cost (the estimated value at the time of inclusion), not the original purchase price. We recommend obtaining a professional valuation report.
Can I depreciate an asset I received as a gift?
Yes. The depreciable base is the value determined in accordance with the Asset Valuation Act (typically a professional valuation report). You begin depreciation in the year you include the asset in your business assets.
What happens to depreciation when I suspend my trade licence?
Depreciation is automatically suspended. In the year your trade licence is suspended, you don't claim any depreciation (not even a proportional amount). When you resume trading, you continue where you left off.
How does VAT affect the depreciable base?
If you are a VAT payer and claim a VAT deduction on the asset purchase, the depreciable base is the cost excluding VAT. If you are not a VAT payer, the depreciable base is the cost including VAT.
Practical Tips for OSVČ Depreciation
📋How to Make Depreciation Work for You
- Think about the timing of your purchase — in year 1 of straight-line depreciation, the rate is lower. If you buy an asset at the end of the year, the depreciation in that year will be minimal. It can sometimes pay off to wait until the start of the next year.
- Make use of suspension — if your income is low in a particular year, suspend the depreciation and claim it in a year where it will deliver a real tax saving.
- Minor assets just below the threshold — if an asset's price is just above 80,000 CZK, check whether it's possible to configure the setup differently (for example, purchasing components separately, provided each one costs less than 80,000 CZK).
- Maintain asset cards — for each depreciable asset, create an inventory card with the following details: name, date of acquisition, acquisition cost, depreciation group, depreciation method, annual depreciation amounts.
- Keep your documents — archive the purchase invoice and other supporting documents for the entire depreciation period plus 3 years after the final depreciation entry.
- Got an electric vehicle? Use extraordinary depreciation — 24 months instead of 5 years makes an enormous difference to your cash flow.
Asset Depreciation Made Easy with DokladBot
Calculating depreciation, choosing the right method, maintaining asset cards — all of this takes time. DokladBot helps you track your assets and calculate depreciation right through WhatsApp. Enter your asset details and DokladBot will calculate the depreciation for each year, suggest the optimal method, and remind you when to include depreciation in your tax return.
Try DokladBot and stay on top of your asset depreciation without complex spreadsheets and calculators. Your AI accounting assistant is always at hand.
Useful Links to Official Sources
- Act No. 586/1992 Coll. on Income Taxes — Depreciation of Tangible Assets (§ 26–33) (Czech Financial Administration)
- Annex No. 1 to the Income Tax Act — Classification of Tangible Assets into Depreciation Groups (Czech Financial Administration)
- GFŘ Guideline D-59 — Uniform Procedures for Applying Income Taxes (Czech Financial Administration)
Disclaimer: This article is for informational purposes only and does not replace professional tax advice. The information is based on legislation in force as of 1 January 2026. For advice on your specific situation, we recommend consulting a tax adviser or contacting the Czech Financial Administration directly.
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