Tax tips for IT freelancers: What can I deduct as a freelancer in Germany?
As a freelancer in Germany you can deduct any business related expenses from your freelance income. This has an impact on the total amount of taxes you will have to pay at the end of the year. Deducting your expenses will also reduce your monthly or quarterly VAT payments so that you can even save money during the year.
In this article we would like to highlight the most common expenses for freelancers.
Equipment & Software
The general rule is that work equipment related to your freelance business is tax deductible.
Tech Equipment is often expensive and IT freelancers need powerful computers, several screens and other devices. You will be able to fully deduct your work equipment if you use it for work purposes at least 90% of the time. Below 90% you should calculate the percentage of usage for business purposes.
Common examples of work equipment include:
- Computers, laptops and notebooks
- Devices and machinery (e.g. a Camera for a photographer)
- Mobile phone (if heavily used for the business)
Expensive equipment over 800€
If you buy equipment for less than 800€, the whole expense is immediately tax deductible. Expensive equipment over 800€ is treated differently. The equipment is assumed to reduce its value over time due to wear and tear. The steady reduction in value of the product is called depreciation.
Working from home has always been a popular option amongst freelancers in tech. However, not every work setup is considered a home office for tax purposes, so it is important to pay attention to the requirements.
What is the requirement for declaring the home office as an expense?
The room which is used as an office must be a separate room, used almost exclusively for professional purposes. For example, a bedroom with a desk in the corner cannot be declared as a home office.
How much can I deduct for my home office?
To calculate the office portion, divide the working area of your home by the total area of your home. You would then be able to declare the office portion of the total rent as a business expense.
Can I also deduct part of the utility bills?
Yes, it's possible to deduct the relative portion of your utility bills as a home office expense. This includes: electricity, water, gas, cleaning, etc...
What about co-working space?
Co-working space is a great way to work as part of a community while being self-employed. Subscription for a co-working space is fully deductible as a business expense. Just make sure to get an expense invoice with all the required details.
Courses & Trainings
Digital working fields are constantly evolving. As a professional in tech it is important to keep up to date through courses and workshops. You can expense any courses that are directly related to your business activity.
Keep in mind that the financial authority (Finanzamt) may want to see additional information about the course to verify that it is directly related to your work. It is recommended to keep the details of the training program such as syllabus or other relevant material for a future tax audit.
Can I deduct a German language course?
If you have recently moved to Germany, learning German could be really helpful to get started as a self employed business owner. German courses are fully tax deductible.
Is there a limit to the number of courses I can deduct?
You can deduct up to 4000€ of training and education costs a year.
Depending on your business activity there are many more options to declare expenses, for example travel expenses for business trips or to your workplace. Business meals with clients can also be deducted partially.
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