Tax Deductions

Bureaucratic Requirements in brief

As a self-employed person, you can deduct all business expenses from your taxes that:

1. Are caused by your self-employment. → only work-related costs count, private purchases cannot be deducted
2. Are necessary or at least "beneficial" for your professional activity. → everything deductible must be related to your work
3. Are verifiable. → the tax office requires invoices/receipts for everything

Don't let anything slip through!

Even if you are not subject to mandatory bookkeeping, you must retain tax-relevant documents and be able to provide evidence for all expenses you want to deduct.

Physical receipts may be digitized, while digital receipts must be stored in their original format.

These retention periods apply:

• 10 years: received and issued invoices (including register receipts!), bank statements, contracts with tax relevance, tax assessments and tax returns
• 6 years: business correspondence (e.g., quotes, orders, complaints)

Depreciation

For items (and software) that you use for more than one year, depreciation comes into play — the distribution of acquisition costs over the expected useful life of a purchase.

For acquisition costs over 800€ (net), depreciation over time is required (e.g., work computers, office furniture).

See also our guide → Using Depreciation for Large Expenses

What you can deduct

Whether you deduct gross or net amounts — let's clarify.

If you are subject to VAT and entitled to Vorsteuerabzug (VAT reclaim), you only deduct net amounts — you receive the Vorsteuer back separately from the tax office.

However, if you are a small business owner (under §19 UStG) and do not deduct input tax, you can deduct the full gross amount as a business expense.

The Basics

Work equipment is needed for your self-employed work.

• Computers and software (e.g., accounting, graphic design programs)
• Office technology (e.g., printers)
• Office supplies (paper, pens, etc.)
• Tools, equipment, and machines (e.g., cameras or circular saws) and materials
• Typical work clothing — only clothing worn exclusively for work (e.g., protective clothing, uniforms, surgical clothing, or clothing with company logo)

Rent and utilities (electricity, water, heating, cleaning) are deductible — e.g., for offices, coworking spaces, workshops, or storage.

In a home office, rent and utilities for a workspace can also be proportionally deducted, but only if it is the center of your work activity. Without cost documentation, a daily flat rate (max. 1,260€ per year) for a workspace in your home is deductible.

Office furniture & furnishings can also be deducted — e.g., a daylight lamp or your new ergonomic chair.

Mobile phone plans, internet, etc. are deductible business expenses. Here too: declare dual use (private and business) and deduct expenses proportionally!

• Office DSL → fully deductible
• A phone contract for client calls & chats with friends → proportionally deductible

Mobility can be deducted.

• Bicycle, rail pass, transit ticket, public transport or taxi costs (if predominantly used for business)
• Business trips with a private car (logbook may be required) or company car (observe regulations for private use!)

Professional Development

Further training through courses (including travel costs) and professional literature (including digital) is deductible.

Finances

Loan interest (cost of a loan) can be deducted. Loan repayments cannot be deducted.

Account management fees for business accounts are fully tax-deductible.

Operating Costs

Marketing and advertising for yourself/your company are tax-deductible.

• Logo design, website creation, and content management
• Printing of business cards, flyers, and posters
• Advertising on social media platforms

Business-related insurance can be fully deducted.

• e.g., business liability, business legal protection, equipment insurance for work devices

Contributions to professional associations such as chambers of commerce, chambers of crafts, architects' or lawyers' chambers, and other industry associations are deductible.

For Getting Started

Startup costs (e.g., notary, business registration, trade fair visits, consulting services) incurred up to one year before founding can be deducted.

Salaries (including social security costs) and service costs (e.g., tax consulting, graphic design services, etc.) reduce your profit.

Gifts to clients/business partners up to 50€ net per year can be deducted → this is an exemption limit, not a tax-free allowance! Gifts under 10€ are disregarded.

Gifts to employees are always business expenses and deductible. Up to 50€ they are a tax-free benefit in kind; above that, they may constitute taxable wages!

Expert Tip — deferring Tax Liability

The Investitionsabzugsbetrag (IAB — investment allowance) shifts tax liability into the future.

With up to 200,000€ profit/year, you can claim up to 50% of planned acquisition costs for movable, depreciable assets (car, machines, laptop) before the purchase. You reduce your profit, lower your tax burden for the current year, and stay liquid.

The investment must be made within three years and be used at least 90% for business purposes. In the year of acquisition, the acquisition costs are reduced by the IAB and depreciation is adjusted accordingly.

Who can help me?

Self-employed people in Germany often feel left on their own — and not without reason. Especially when it comes to taxes, there is a lot to consider, and few founders can afford professional tax advice.

While there is no equivalent of the wage tax assistance association (for employees) for businesses, here are some resources for tax questions:

• Tax office
• Chamber of Commerce (IHK) and Chamber of Crafts (HWK)
• Startup centers at universities
• Initial consultations with tax advisors