Finance photovoltaic or pay cash? Investment amount / interest

When financing a photovoltaic system, I can not only deduct the investment amount but also the interest from taxes, right? So, should one finance a photovoltaic system at 3 % because with a personal marginal tax rate of 42 %, this effectively amounts to only (1 - 42 %) * 3 % = 1.74 % interest, even if one has the money in cash, and instead use the cash for a special repayment of a mortgage (2.3 % interest)?

That is flawed because you compare the income against the interest and the investment is also amortized over the years.

Example: €10,000

Once, I can offset the annual depreciation (5% over 20 years) of €500 against the income, the other time the monthly installments. Because the monthly installments also include the interest for the 20-year loan, this amount is higher; at 3% interest, it is €672.

Then calculate your compound interest savings from early repayment of 230€ / year or 4,600€ in 20 years without the compound interest that still comes on top. Tax and risk free

Once again in detail:

Option 1:

The €10,000 in cash is used for a special repayment on the 2.3% mortgage. This results in approximately €15,758 of saved remaining debt after 20 years.

The photovoltaic system is financed through a loan. A 3% solar loan of €10,000 over 20 years requires a monthly payment of €55.26, i.e. €663.12 per year. On the other hand, there is a tax saving of 42% * €163.12 = €68.51 compared to the option of paying for the solar system in cash, where the depreciation over 20 years is 5%, or €500.
This leaves an annual financing cost of €665.52 - €68.51 = €597.01.

Option 2:

The €10,000 in cash is used to finance the photovoltaic system.

Since the photovoltaic system is financed, the €597.01 per year originally intended for financing the photovoltaic system can flow as special repayments towards the home construction loan. This reduces the remaining debt by €15,104 after 20 years.

Option 1 therefore saves €654 of remaining debt at the end, or if the savings are spent monthly, €1.75 per month.

Conclusion: Forgoing a new photovoltaic loan appears reasonable in this calculation example; for €1.75 monthly, the effort is not worth it.

That's already so many numbers again... first of all, thanks , I know what I'm going to do with my photovoltaic system now. I'm going to automate it.

And then it gets even more complicated because with the financing option (interest as a tax expense), you'll probably also find a system that promises a higher return in the long term.

If you want even more numbers, consider the special depreciation (SonderAfa) in the first year.