Your tool for taxes
It is important to have a set-up for bookkeeping and taxes as a self-employed professional.
Whether you’re a freelancer, a business owner or a Kleinunternehmer, with Accountable you track, manage, and file your taxes with ease. The Accountable software even guarantees error-free tax returns: In the case of errors due to Accountable, we will refund resulting back taxes up to 5,000€.
What you can do with Accountable:
• Send professional invoices: Correct invoices with accurate legal notes for special cases.
• Save taxes with every expense: Scan receipts and see instantly how much you save.
• See how much taxes you have to pay: Connect your bank account and see your money left after taxes.
Understand your business costs
As a self-employed professional, the best way to reduce your taxes is to maximize your business costs, also called deductible expenses. We created this free tool for you, to search all possible deductible expenses in Germany!
FAQs on business costs
Deductible expenses are business-related costs that can be subtracted from your total income. This way, you reduce the income you have to pay taxes on and ultimately reduce the amount of income tax you owe. Some common deductible expenses are:
- Office rent or home office
- Internet and phone costs
- Costs while traveling, e.g. for meals
- Costs for car, public transport etc.
Here is a list of common deductible expenses for self-employed professionals in Germany:
- Business expenses, e.g. Office rent, office supplies, website hosting, marketing expenses, software and subscriptions
- Travel and transportation, e.g. fuel, public transportation, accommodation during business trips, meals while traveling for business
- Accounting fees, e.g. fees paid to lawyers, or tax advisors for business-related services
Professional Development, e.g. training, seminars, and workshops - Home office expenses, e.g. home office lump sum, or rent, utilities etc.
- Bank fees, e.g. fees associated with your business bank account or payment processing services
- Business meetings, e.g. client dinners, presents for colleagues and clients
Yes, there are two ways of deducting your home office. There is the home office lump sum, which allows to deduct €6 per day that you worked at home for 2023. However, the limit here is a maximum of €1,260 per year. So if you have worked more than 210 days in the home office, you can still only deduct 1,260€.
The other possibility is to claim the actual costs for your home office, meaning rent, utilities for your office room etc. In this case, the home office needs to be the main place of work for you.
If you go on a business trip, you can deduct certain costs. These include travel costs, such as a train tickets, hotel accommodation costs, and the additional cost of meals. There is a lump-sum for this, which is called Verpflegungsmehraufwand. With this flat rate, you can deduct €14 per day of arrival and departure and even €28 for each full day.
Generally, you can only deduct costs that are directly related to your business activities. So, if your fitness subscription is primarily for health and personal well-being rather than for business purposes, it is typically not deductible.
You can deduct your car for business purposes, like visiting clients or traveling to business meetings.
There are two main methods for deducting car expenses:
Actual Expenses: You track and deduct the actual costs associated with your car, including fuel, insurance, maintenance, parking fees etc. You need to keep detailed records and receipts for these expenses.
Mileage Allowance Method: This method involves calculating deductions based on the number of kilometers driven for business purposes. You maintain a mileage log (Fahrtenbuch) that records each trip’s date, purpose, starting and ending locations, and mileage. You then apply the standard mileage rate of 30 Cents.
Set up your health insurance
For most self-employed professionals this is one of the highest costs. Here you find guidance on what type of health insurance you can get and how to deduct it.
Unlike employees who are covered through their employers, freelancers and entrepreneurs must arrange their own comprehensive health insurance coverage. There are two options available:
Public Health Insurance in Germany (GKV):
Solidarity system: The GKV is a popular choice because of its “everyone contributes, everyone benefits” approach.
Who’s covered? This system predominantly caters to workers, ensuring a wide coverage for the German workforce.
Income-based contributions: Your monthly payments are determined by your earnings, but there’s a cap to ensure fairness.
Private Health Insurance in Germany (PKV):
Customized Premiums: With the PKV, your premium is uniquely tailored based on age, health history, and chosen benefits.
Flexible coverage: This option allows for more personalised plans, accommodating those who want treatments like alternative medicine or premium hospital care.
What about health insurance for part-time self-employed freelancers in Germany? Even if you freelance on the side, your primary job’s insurance setup has got you covered.
Before choosing between the public (GKV) and private (PKV) health insurance options, consider the long-term implications. Initial savings from the PKV for younger professionals can shift to higher costs in later years. So it’s important you take an informed decision.
| Age | Public Health Insurance (14% of Income) | Private Health Insurance (Minimum Coverage) | Private Health Insurance (Premium Coverage) |
|---|---|---|---|
| 26 years old | €198 - €918 | €223 - €859 | Higher than €859 |
| 56 years old | €198 - €918 | €503 - €1,402 | Higher than €1,402 |
| Aspect | Private Health Insurance | Public Health Insurance |
| Cost Factors | Age, coverage level, pre-existing conditions | Income, contributions based on total earnings |
| Cost Flexibility | Premiums based on chosen coverage and services | Contributions may vary based on total income |
| Tax Deductibility | Premiums partially deductible as business expenses | Contributions fully deductible as business expenses |
| Income Dependency | Not directly tied to income | Contributions based on total earnings |
| Age-Based Premiums | Premiums may increase with age | Not affected by age |
| Coverage Customisation | Customizable coverage options | Standardized coverage provided |
| Switching Difficulty | Can be challenging to switch back to public | Switching to private insurance is more flexible |
| Healthcare Providers | Wide network of private healthcare providers | Limited to providers within public network |
| Eligibility Criteria | Based on self-employed status and income | Requires certain employment history and income |
FAQs on Health insurance
As a self-employed person, you can choose between private and public health insurance. The decision depends on your income, age, and other factors.
No, private health insurance for self-employed persons is not inherently more expensive than public insurance. Especially with a moderate to high annual income, the private option could be more cost-effective.
To voluntarily enter public health insurance when self-employed, you must have been insured under public insurance for at least two out of the last five years or have been insured before starting your self-employment.
The costs are based on your earnings, including all sources of income. The contributions can be deducted from taxes since self-employed individuals pay higher contributions compared to employees.
Switching from public to private health insurance is possible, but there are specific requirements. You must be under 55 years old, meet a certain income threshold, and not have been insured under public insurance for the past five years. Reverting back to public health insurance comes with certain challenges.
Here is an example of when public health insurance may be a favorable choice for self-employed professionals:
Maria is a graphic designer. She is considering her health insurance options as she becomes self-employed. Let’s examine why Maria might choose public health insurance over private insurance in this case:
1. Income level: Maria’s income is relatively low, especially during her first years of self-employment. Public health insurance premiums are calculated based on income, which means that Maria’s contributions will be proportionate to her earnings. Private insurance, on the other hand, generally charges premiums based on factors like age and health status, and they tend to be higher, making them less affordable for individuals with lower incomes.
2. Stability and predictability: Public health insurance is more stable and predictable because it is based on income and are subject to a cap. In contrast, private insurance premiums can increase significantly with age.
3. No discrimination based on health: Public health insurance cannot deny coverage or charge higher premiums based on pre-existing health conditions.
4. Family considerations: If Maria has a family, public health insurance often provides family coverage at no extra cost. Private insurance policies usually require separate premiums for each family member.
5. Flexibility: If Maria’s income fluctuates, her public health insurance contributions will adjust accordingly. So she can continue to afford health insurance even during periods of lower income.