The tax system is complex and keeps on raising questions for many entrepreneurs. Starting with the question of which types of taxes are relevant for you and your company, through various tax obligations and deadlines that must be observed, to the question of how you, as a self-employed person, can save taxes.
More money through depreciation and lump sums
In order to properly save or reduce business expenses, it is first important to understand what it is all about. Depreciation is a decrease in value that ultimately helps you
lower your tax burden. Business people show the depreciation of larger purchases; this loss lowers the company's profit and can thus lower the tax liability. The extent to which objects can be written off depends on the respective asset.
In addition to depreciation, lump sums offer you another option to reduce your taxable income regardless of the actual amount of the costs. Some of these so-called allowances or deductions are paid directly by the tax office. You have to have others in your own tax declaration specifications. In order to claim a flat rate, no evidence is usually required. Supporting documents are only used if the actual costs are higher than the flat rate. In this case you can claim these costs additionally.
Reduction of business expenses from tax
Business expenses play an important role as far as tax deductions are concerned. You are not referring to advertising in the sense of marketing but at the expense of working people in the course of their work and their profit diminish. This also includes contributions to professional associations and profession-specific insurance companies.
You can claim advertising expenses with the help of the flat rate. This is currently $ 1,000 per year. Married couples who are jointly assessed can use this even though one of the partners does not even reach the flat rate. For example, if one partner has advertising expenses of $ 800 and the other advertising expenses of $ 1,500, they can claim a total of $ 2,500, as in this case both partners are entitled to the full flat-rate advertising expenses.
The advertising costs include, among other things:
● Customer service,
● Application costs,
● Telephone costs,
● Account management fees,
● Training costs.
Deduct company cars from tax
Please note: The company car can also be tax-deductible. With a commercial use of 90 percent or more,
you can save as much as possible, since all relevant expenses such as fuel and insurance for the vehicle can be deducted as advertising costs. In order to deduct travel expenses, it is mandatory to keep a logbook.
Deduct work equipment from the tax
The self-employed can also state work equipment as business expenses. It is important that at least 90 percent of these are also used commercially to be able to deduct them for
tax services.
Work equipment includes:
● Office furniture,
● Mobile,
● Computers and laptops,
● Software,
● Professional support,
● Specialist literature.
Regulations for study and rent
Usually home expenses are not deductible. Under certain circumstances, however, the legislature still allows the removal of a private study. There are two prerequisites for this:
● If there is no other workplace available to you, you can deduct up to $ 1,250 per year as operating costs. This category includes, for example, people who work from home because their employer does not provide them with an individual workplace.
● If your study is the focus of your activity, the entire costs can be deducted. This is especially true for freelancers such as writers or freelance journalists.
So, you can save not only on rent, but also on energy, cleaning or renovation costs as well as the property tax with your home insurance.
Deduct company outings from the tax
On a joint excursion with the company, some costs come together: admission tickets, bills, trainers, or tickets make for extraordinary expenses. Here, you have to know that there are also tax exemptions: With up to two excursions per year, expenses of less than 110 euros per participant are tax-free. Further excursions must be taxed in full. If employees bring relatives to the company outing, the costs incurred will be charged to the respective employee.
As a result, the allowance is quickly exceeded. If the expenses exceed the amount of the exemption, they are considered a pecuniary benefit and must be taxed. Alternatively, the difference between the tax exemption and the costs actually incurred can be in the form of flat-rate wage taxis paid by the employer to the tax office. This is currently 25 percent.
Handicrafts and household services
Expenses for craftsmen, household help or gardeners do not reduce the taxable income, but can be deducted directly from the tax liability. Handicraft services related to the household, such as renovation or maintenance work, can almost always be deducted. The prerequisite is that the work is done in your own household.
In order for you to benefit from tax breaks for household-related services, it must be a marginal part of the job. It is also important that you participate in the so-called household check procedure and register your domestic help. You can only take advantage of this tax reduction if you receive an invoice or the contribution to be paid has been transferred. Cash payments are not accepted.
Special expenses: Tax deductible donations and health insurance
Special expenses include all expenses that do not fall into the category of business expenses or advertising expenses. From pension expenses to church tax, there are a number of expenses that can be deducted as special expenses. Here is an overview of possible special editions:
Deduct health insurance from tax
With the introduction of the Citizens Relief Act in 2010, the self-employed have the opportunity to deduct health and long-term care insurance contributions from tax. The contributions to statutory health insurance and long-term care insurance can be almost completely deducted. Note that there is also a maximum limit for pension expenses. If this is exceeded, only the contributions that exist within the framework of the basic benefits can be taken into account. Optional tariffs and additional services are not deductible.
For privately insured persons, somewhat different regulations apply, which are usually somewhat more complicated, as various, non-deductible additional benefits are often involved.
Donations in the tax return
Those who donate are doing good and can save taxes at the same time. As a self-employed person, you can state donations as special expenses in your income tax return. Companies consider this category under business expenses. In order for donations to be actually recognized as such, the following requirements must be met:
● They support charitable, charitable or church purposes.
● The donations do not constitute payment for something in return.
● They take place for voluntary and unselfish reasons.
● The recipient is from a tax office recognized as non-profit.
In order for the tax office to accept donations in your tax return, you must also provide evidence. For donations of up to $ 200, the deposit slip or a bank statement is sufficient. If the sum exceeds this amount, an officially recognized donation receipt must be presented.
Save on church tax
Anyone who lives in the USA and is a member of a religious community who is entitled to the collection of church tax must pay church tax. The amount depends on the respective place of residence and is divided into two percentages. For example, in some states, you pay 8 percent and 9 percent in other states. The church tax can also be indicated in the special expenses. Those who leave the church are accordingly exempt from church tax liability.
Tax deduction from private schools
The young have a right to education – and in private schools this right is expensive compared to state schools. If you send your child to a private school, you can also deduct part of the school fees for tax purposes. A maximum of 30 percent of the costs may be claimed, but may not exceed $ 5,000 per child. If the child attends a foreign school, this must be recognized by the State authorities in order to claim the costs.
Deduct maintenance from tax
Anyone who is obliged to pay maintenance can regularly deduct this from tax. The maximum amount here is $ 9,000 per calendar year. If the payments are specified as special expenses, one speaks of real splitting. This is where the tax performance principle comes into play. This means that the maintenance payments reduce the performance of the payer and increase that of the recipient. Ultimately, this leads to a reduction in your tax burden when you have to make maintenance payments. For this principle to take effect, the maintenance recipient must be on the income tax return sign.
Extraordinary burdens in the event of unexpected events
In order to avoid cases of hardship due to extraordinary burdens, these can also be claimed as special expenses. The limit up to which you can claim these expenses is determined individually by the tax office and is based on factors such as marital status and number of children.
Some examples of such extraordinary burdens are:
● Allergies: Medicines and therapies can be deducted as medical expenses. If you make permanent use of a drug, it is best to submit a permanent prescription to the tax office.
● Alternative medicine: These are costs that arise for homeopathy or herbal medicine. If a doctor has prescribed the treatments, an official medical certificate is not necessary.
● Funeral costs: If the estate is insufficient to cover the costs of a funeral, relatives can claim them for tax purposes. This includes costs for the coffin, flowers and wreaths as well as obituaries.
● Treatment costs: The health insurance does not always cover all costs incurred for a spa treatment or therapeutic treatment. Costs borne by yourself for accommodation or travel can be deducted from tax.
● Care costs: Age-related accommodation in a retirement home is not tax-deductible. However, if this occurs for reasons of illness, this is also one of the extraordinary burdens.
Punctuality and order pay off
It is helpful to deal with the unavoidable tax return not only when it is due, but for the entire financial year. Keeping your documents tidy and keeping your invoices and receipts carefully and orderly saves you a lot of work and time.
In addition, a separate business account of personal and professional income and expenses as well as the corresponding evidence to the tax office. In addition, you can easily keep an eye on your professional expenses.
