The Best Tax Tips For Entrepreneurs, Self-Employed And Freelancers. The self-employed and entrepreneurs often pay too much income tax. The reason for this is just as simple as it is paradoxical: the possibilities of deducting expenses from tax to reduce profit are so varied that even seasoned entrepreneurs rarely think of everything. What is meant are not half-silly tax-saving constructions, but very legal deductible expenses that arise in the context of entrepreneurial activity.
- Ride costs: Do you use your car almost exclusively (more than 90 per cent) for work? In this case, the car is a piece of work equipment. This means that all expenses (depreciation, interest, fuel, insurance, etc.) are deductible as business expenses. What costs you can apply and what you should pay attention to so that the auditor does not have any objections!
- Entertainment expenses: Business is done while eating! This sentence is one of the oldest business wisdom. And because the tax authorities know this too, you can claim a large part of the entertainment costs for your customers or employees as business expenses. The most crucial basic rule: For the tax office to recognize the costs, they must be reasonable and plausible. What else you should pay attention to when it comes to entertainment costs
- Travelling expenses: With the 2014 travel expense reform, not only was the term “regular place of work” replaced by “first place of work” – but some things have also changed in terms of taxation. As of 2014, the first place of work will be not only a permanent establishment of the employer, but also that of a third party appointed by the employer (e.g. outsourcing, longer project work at the customer, etc.). The new provisions have a significant impact on the tax treatment of travel expenses and the deduction of expenses in the case of double housekeeping.
- Low-value assets: When you buy machines or cars for your company, you usually write off the purchase price over several years. But that’s not worth it when buying items that cost comparatively little. Therefore, the tax office accepts a simplified depreciation for it. But be careful: There are also different variants here! Which items you can write off as a low-value asset and what you should consider. When it is beneficial to create a collective item and when the immediate deduction is the better choice.
- Gifts to business partners and employees: Small gifts keep a friendship alive – and sometimes customers or experienced employees too. If you show your appreciation to business partners or employees, you can book part of the costs as business expenses. Which gifts you can claim for tax purposes as business expenses, which record-keeping obligations exist and why compliance with the exemption limit is so important.
- Workspace: As an entrepreneur, you can claim the cost of a study in your house or apartment under certain conditions as business expenses.
The costs are unlimitedly deductible if the office is either a permanent establishment or the focus of your professional activity. If this is not the case, but there is no other workplace available to you for your work in the study (e.g. because there is no accounting office in your workshop or warehouse) Which costs you can deduct and which requirements the tax office requires for the recognition of a study.
- Write off company building: If you use office, production or warehouse buildings for business purposes to generate income, you can deduct the acquisition or manufacturing costs from tax. It does not matter whether you work commercially, as a freelancer or not self-employed. What options you have (straight-line or degressive depreciation) and what else you should consider when dealing with the tax office.
- Employment contracts with family members: The word “family business” says a lot about the structure of many small and medium-sized companies. When everyone contributes to their skills, it is a pleasant and often successful thing. Besides, employment contracts with your spouse or other close relatives also bring you financial advantages and tax structuring options. In the case of special tax-free allowances, for example, the company benefits from deductible business expenses and the family member from tax-free income. However, when it comes to employment contracts with relatives: Don’t overdo it, how you can benefit and still stay on the safe side from a tax point of view.
- Investment deduction: The investment allowance can be of interest to entrepreneurs, especially in perfect business years. If you have made significantly more profits than you expected, this tool can help you reduce operating profit and save money for future investments. Under what conditions and in what amount you can use the investment allowance.
- Provisions – for example, for the pension: As an entrepreneur, in particular, you should plan your retirement provision in good time – including your company pension. As a managing director, for example, you have to set the course for your pension at least ten years before your planned retirement and set up corresponding provisions in the balance sheet (otherwise the tax office assumes a hidden profit distribution). Your tax advantage: You can deduct the provisions directly from profit, so you pay less tax.
- Own receipt: Lost the restaurant bill? Or the fuel receipts from the last trade fair? This is annoying because the tax office usually does not recognize these expenses without a receipt. But there is a way out: In individual cases, you can fill out your receipt as a replacement for the lost receipts. You should make sure that the self-receipt contains the same information as possible as the originals (i.e. payee, amount, date, the reason for payment, etc.). Your signature on the – promptly completed – self-receipt is also helpful
- Accumulation benefit. Suppose you are among the higher earners and your income tax rate is well over 40 per cent. In that case, there is a tax-favourable alternative for sole proprietorships or partners in a commercial partnership: Do not take profits. The tax office only requires a tax rate of 28.25 per cent for profits that are not withdrawn (retained).
- Use family members to save taxes. Suppose you do not employ family members for more than two months or 50 days a year. In that case, you can save a lot of taxes: For this form of very limited, short-term employment – for example for the inventory or the Christmas business – there are various options for tax lump sums, both for You as well as your family members can be of benefit.