7 tax tips for self-employed – do you know them all?

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Tax tips for the self-employed at the end of the year

Another year is coming to an end. Hopefully, 2023 will finally be a good year for the world. 

 

Besides preparing your exciting new year’s resolutions, the end of each year is perfect for taking some proactive steps to save you some cash. An end-of-year resolution might be: Let’s finish this year as profitably as possible!


You already know that it pays for self-employed people to increase their expenses at the end of the year. The tax office knows two types of goods here:

Consumable Goods & Durable Goods

Tax tip 1: Buy on stock

Is this new to you? For example, you can buy consumables such as materials to reduce your profit. These goods are immediately deductible. To further increase your expenses, think ahead here and stock up on consumables if you don’t have a storage problem. 

Tax tip 2: Extraordinary depreciation

Durable goods cannot be deducted immediately. From the point of view of the tax office, you have not yet had any costs when purchasing a durable good. You exchanged money for an item of equal value. 

 

But the item will depreciate and only then will this count as an operating expense. Depreciation is calculated yearly and splits over the months. So if you buy an item in December and that item has a useful life of 10 years (120 months), you will be able to deduct only 1/120 of the full cost.


But wait, you may be entitled to an extraordinary depreciation! If your profit in 2022 was not more than €200,000, you may be entitled to a special depreciation of 20% for certain purchases this year.

Tax tip 3: €800 Rule

There is an exception to your advantage! If the item you buy is below €800 net, you can deduct it from your taxes. Even durable goods! Even if you are a Kleinunternehmer the €800 net applies. So if you are a Kleinunternehmer who looks at gross amounts generally, your items can cost up to €800 + 19% VAT = €952 gross!

Tax tip 4: Computers and software tax deduction

Another exception to your advantage! You can write off purchases for these products. This applies to computers, laptops and tablets but not to smartphones.

Tax tip 5: Claim your expenses for next year now

Surely you have some consistent expenses? You can make prepayments to lower your taxable income this year. For example, you could pay the office rent for January in December. 

 

Another option is to pay your health insurance up to 3 years in advance. If you use specific software tools, it often makes sense to switch to an annual subscription now. So you save on the purchase price and reduce your tax burden all at once!

Tax tip 6: Benefit from future expenses

Planned business purchases for movable fixed assets like furniture can already be deducted from tax this year at 50% of the expected purchase price. 

 

Which purchases are you planning to make in the next three years? Look for their purchase prices. You could deduct 50% of this amount in 2022 if you did not make more than €200,000 in profit in the previous year.

Tax tip 7: Delay your billings

If it makes sense for your situation, you may organize the money you are supposed to receive this year to rather be transferred into your account in 2023. Less income for this year means fewer taxes.

Watch out for the 10 days rule:

If you make regular payments by January 10th (e.g. leasing, telephone, insurance), but they belong in the year 2022, you must take them into account in 2022.

The same also applies in the other direction. Expenses that belong in 2022 should be paid before December 21st.

The end of each year is also great for changing your tax advisor.

Boost your business by having Kontist tax experts specializing in self-employed people like you by your side. Sign up to Kontist Tax Service and you’ll never pay too much tax again.

With your Kontist app, you organize your finances and receipts and the Kontist Tax Advisory takes care of accounting and tax declarations (business and personal). All for a fixed price.

Make 2023 your year!

Do you wish to find out how to set out and level up your freelancing buisness in Germany? Find out how the Expat Business Club® can help you.

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