Hello and welcome. It’s nice that you are here. We have a lot planned today and I would also say let's not lose a lot of time. Our topic today is the tax return, namely the tax return for last year, i.e. for 2021. Of course, the tax return for last year does not look groundbreakingly different from previous years. But there are a few things that have changed for the last tax year, i.e. for the tax return that you have to submit this year. And my personal requirement of this webinar is that you now pay attention to me for about an hour and then you will know how you can save money and time when preparing your tax return.
I have an eye on both the agenda and you and I think that gives me everything that is important. I want to focus on the content. What is today about? The first question is: who actually has to file a tax return? This is probably a quick topic for you guys. Small spoiler: self-employed people always have to submit a tax return. Then it comes down to what you can deduct from your taxes. For example, my mum has been self-employed for about 20 years and she sits down once a year and says “Well, I'll do my taxes now”. Usually she invites me over and then there is something to eat etc. and then we do her taxes together. As a tax person you would never say: I do taxes.
Because dealing with taxes is actually a lot of tasks and deducting something from the tax actually has a lot of faces, because there are quite different levels of how and where you can take something into account for tax purposes. And today we want to take a closer look at that. Then of course we will go into the following as an important point: what is actually special for the calendar year 2021? What needs special attention this year? What has changed compared to the previous year? And there are, and many people don't even know that, so-called key audit areas from the tax office. This means that the tax office actually issues a list and communicates in advance what it will look out for when checking the tax returns. And that means that you should of course not play around with these topics under any circumstances. And it also means that if you want to get your tax assessment quickly from the tax office, you should ideally send the papers, documents, invoices, etc. for these main points of the check right away, because otherwise you risk the processing time for the tax return being very long.
Of course, this doesn't mean that you can tinker around with all other topics. But I still find it very important to know what the tax office actually pays most attention to for the 2021 tax return. We are a digital tax consultancy especially for freelancers and the self-employed. Our clients are only freelancers and self-employed people. We don't do GmbHs, we don't do inheritance tax, we don't do partnerships. We only do ongoing accounting, tax returns and advice for freelancers and the self-employed. And I recently went through our new clients who have come in now and over the last few months and made a summary of all the client meetings that we have on a regular basis. I have collected the five most common things that can have the greatest impact, but which people are not really aware of. Of course, there are a few things that you already know, especially if you've been self-employed for a while.
But in my experience, quite a lot of people don't know it yet. And that's why I want to mention it in any case. And maybe there are also one or two tips that you don't know yet, which I personally, although I studied, never really had on the screen to use. Of course, I am only concentrating here on the tips that you can still do for last year. You always have the greatest creative opportunity when the year is still running. But that's a whole different topic. At the end of the year we can talk about what you can still do this year. And there is actually a separate webinar on this channel: what else can I do at the end of the year to save on taxes this year? But it is now too late for 2021. And that's why I'm only concentrating here on the things that you can still do now that the year is already over. And at the end of the webinar, I would like to give you a brief overview of which tools I think you can use to do your tax return the easiest and best way.
There are a lot of solutions on the market that are always advertised diligently. I live in Berlin, the billboards are overflowing with Taxfix. The problem with Taxfix, however, is that you simply cannot use it as a self-employed person. This means that you cannot fill out the Appendix EÜR, Appendix S and Appendix G with Taxfix. That's why it's all well and good that they do so much advertising, but it's super annoying because they don't actively tell you that they can't do it.
That means, as a self-employed person, you might start doing your tax returns and then later regret that you wasted your time. You cannot complete the tax return completely because Taxfix does not have this functionality. And so I want to give you an overview of what I think are the best tools you can use. I would like to introduce myself very briefly and I'll keep it really short. In a recent webinar, someone complained that it's rude to start off by rambling on here without introducing yourself. And of course the people who subscribe to the channel and watch my videos regularly know me, but for all the people who are new, let me introduce myself. I'm Melchior, I'm from Berlin and I'm a trained tax clerk. I also studied economics with a focus on tax law and auditing. How this came about is a long, different kind of story, but not the subject of the webinar. But that's why I'm very familiar with all the topics, at least in theory.
I worked for KPMG for a while, a large international accounting firm. But I worked in the department there and also worked in an ETL law firm for a few years. In this medium-sized law firm there were around 20 employees, two tax consultants and the clients I looked after were hairdressers, craftsmen, architects and logistics companies. So from zero to five employees approximately. And that's where I experienced the classic law firm life, but personally I really didn't endure it very long because I saw from the clients all the time how great it can be to be self-employed. And I mentioned that my mum is also self-employed. That means I was shown all the time how nice it can be to work independently and freely. And that's why I couldn't stand it for long, resigned and started my own business as a consultant for a tax technology company, i.e.
A TaxTech company. I had a relatively large number of customers, for example I advised Klarna, I worked with Felix Eins and also at Kontist, among others. And together with the founder of Kontist, I started Kontist Steuerberatung about two years ago. And since then I've been doing the digital specialised tax advice for freelancers and the self-employed. For example, I do these webinars and all communication, but of course also internally the whole organisation. We try to make the whole thing a bit more customer-friendly, in contrast to a classic law firm. Why is all of this important to us? I know the theory, but I also know the pain because I used to be self-employed and I know that I hated this topic even though I knew how to do it properly.
And I also know the entrepreneurial aspect. Tax advice isn't always the best solution either, and I'm not going to sell you our services here either, but of course we can help you with your bookkeeping and tax returns. But honestly, if you want to do it yourself, please do it yourself. I'm not going to sell you anything right now. If you say you like doing it yourself, I would personally always recommend you to do it yourself because then you have control over your stuff. You don't have to give that up. Anyone can do it themselves, which is why the channel is completely free. We have over 150 videos where we really explain every aspect of the tax return. Let's get to the first point. Who actually has to file a tax return? Honestly, this isn't rocket science. All self-employed persons must file a tax return.
I assume that most of you here are self-employed. At least that's what the title says: Tax Returns for Freelancers and the Self-Employed. That means you all have to file a tax return, regardless of sales or profit. Even if you didn't make any sales or profits at all or maybe even made losses, i.e. had no sales at all but only expenses, you have to file a tax return.
This can also be good for you, because even if you have made losses, you can offset the losses against other types of income in the same year. If, for example, you were employed last year, you should definitely file a tax return because you will then receive a tax refund because you paid wage tax the whole time as part of your employment. And these payroll taxes are prepayments on income tax per year. If you didn't earn anything last year, but only made losses, then it's still worth it because you can carry the losses back to 2020 and then the decision will be changed again. Or you can take it with you into the future and then use the losses from last year for your tax return in 2022. That means there is an obligation to file a tax return.
But it is also really in your interest that you file a tax return. However, there is basically no obligation for employees as long as you are only employed or if you only have capital income on which you have already paid withholding tax. If you haven't done this, you may also have to file a tax return. And the exceptions also apply, and I don't want to go into that too deeply, because almost all of you are self-employed if you have registered wage tax exemptions with your employer, if you have received wage replacement benefits, such as short-time work benefits, if you had additional income that are over 410 € per year if you have certain tax bracket splits, for example tax brackets III and V.
This is traditionally what you do when you are married and one earns more than the other. Or if you both have tax class IV with a factor, if you received a severance payment last year, or if you have income above the basic allowance as a pensioner or landlord. Incidentally, the basic allowance is 9,744 €. That means you have to submit a tax return. If you had capital income and the capital gains tax was not paid, then you must also file a tax return. Or if you are married, then you typically do a joint assessment, which means you do a joint tax return. However, this does not always make financial sense. Sometimes an individual investment makes sense from a financial point of view.
There will be a video on the subject in the next few days. If you are interested in the whole topic and you are married, then you should subscribe to the channel. There is a video coming very soon that has already been recorded, but has not yet been completely edited. For me and my wife, in 2020 it actually paid off that we both submitted separate tax returns. That's a bit beyond the scope here, but if that makes more financial sense for you, then you'll also need to file a tax return. Next point, and here we come to the first really interesting point: what can I deduct from my taxes? You know that colloquially, you will read about tax tips and tricks and everything you can deduct in the next few weeks and months in the normal mainstream press.
There are many ways to deduct anything for tax purposes. However, there are three main categories that you should be aware of and the first category is expenses, which are directly assigned to an income type. For you as a self-employed person, these are operating expenses. There is quite a bit of confusion between business expenses and operating expenses. As a self-employed person, you have no advertising costs. In fact, income-related expenses are the same as operating expenses for non-self-employed people, i.e. for employees, for example. If they deduct a commuter allowance, training costs or income-related expenses or buy a laptop for work, then these are income-related expenses. You have no income-related expenses if you have no income from non-self-employed work, i.e. from employment. Of course, that doesn't mean you can't have advertising costs as business expenses. But there's actually quite a bit of confusion there.
If you now read an article, for example in Spiegel Online, about tax deductions and there is something about income-related expenses, then I simply notice that our clients also think that this applies to them one-to-one. But that's not it. Advertising expenses are primarily for employees and of course the mainstream press, i.e. Spiegel, Stern, FAZ, Zeit and Bild, write about tax tips, especially when the tax season starts, but these primarily apply to employees and not to the self-employed. That is also the reason why I wanted to do the webinar, because I think there is far too little for the self-employed. You can sell a lot more as a self-employed person. What that is exactly, we'll get to that in detail in a moment.
Then there is a second large category where you can deduct a lot from your taxes. These are the so-called special editions. Special expenses are specific expenses that the state would like you to have. That is, if the state wants you to have certain expenses, they intensify those expenses by making them tax deductible. What that is exactly, we'll get to in a moment. All the insurance, like pension insurance, health insurance, etc.
Are all extra expenses and the state not only wants you to have health insurance, but they even force you to have health insurance as a self-employed person. Many self-employed people do not have a pension insurance obligation, but if you do, you can put it on here as a special issue. A third major category. As I said, this is not an exhaustive list here, but these are really the big pots that you should definitely know about. There is also an in-depth video on the whole topic. You can find that in the video description below. Michelle, maybe you'd like to post the video for these three categories again in the chat. We have in-depth videos on many of the topics discussed today. I have already recorded and published 150 videos. If you are interested in some topics and you have the feeling that I am going too quickly over all these topics, then just have a look at the video description.
There you will find a whole series of in-depth videos that you can watch later at your leisure. Then I go into much more detail about everything. This is very interesting, especially when it comes to tax tips. And the third big group, I stopped there, is under extraordinary burdens. Extraordinary burdens, by definition, are expenses that don't normally occur, but when they do occur, they burden you more than other people. The German legislator wants everyone to be burdened as evenly as possible in tax law. This means that the pain should be as equally strong as possible for everyone.
That is actually the ulterior motive behind tax legislation. I also know that this is often not the case, but that is the basic idea behind it. That is why there is an extraordinary burden. For example, if you have certain strokes of fate and high costs are incurred, you can usually claim these costs in your tax return. Colloquially, this is often known as health care costs. Medical bills, pharmacy receipts etc., you can collect them all during the year and sell them off completely. There are also crazy court decisions and so on. There were once people who paid a ransom to kidnappers to get their family back. And they said that by definition, that's kind of an extraordinary burden and they want to deduct the ransom payment from their taxes.
And they were right. That means tax tip number one: If you ever have to pay a ransom, please ask for a receipt so that you can prove it to the tax office and submit it. This is an extraordinary burden. Let's look at this a little deeper. What are traditional business expenses? I've listed a whole bunch of things now. Office supplies, telephone and internet costs, business accounts, contributions to professional associations, seminars, specialist literature, business travel and car costs, advertising, as I said, advertising costs. It's not the advertising costs that the employees have, but of course you can still advertise. I also have a tip about company insurance, such as professional liability insurance. I see a lot of confusion there too. Your health insurance and your own social security are not business expenses. You can deduct them for tax purposes, but not as a business expense.
I also have an in-depth video on how you can deduct health insurance from your taxes. It's also in the video description below. It is important if you have employees that the salaries for the employees are of course operating expenses and then the social security costs for your employees are also operating expenses, because without these costs you would not have these employees. But the legislature says your own Social Security doesn't apply. I would like to make one important point here.
You deduct operating expenses in the bookkeeping, that is, actually already in the current bookkeeping. Of course, there are a few costs that you might not put in your accounts on a monthly basis. If you have a separate room at home for the home office, you can deduct a proportion of the rental costs as operating expenses, as can the ancillary costs, such as heating costs and internet, for example. If you have a mobile phone contract and use it both privately and for business, you may pay for it via your private account. However, if you use the mobile phone 50% for business purposes, you can book 50% of the costs as a business expense. And it makes sense, for example, to do this every year. My personal recommendation would be to always let the costs, which are incurred both privately and operationally, run through the business account, so that you can also take this into account in the bookkeeping during the year. But if you didn't do that for the last year, for example, you can still simply book the costs in and thus reduce your profit from self-employment or freelance activities and, of course, pay less tax.
An important point here is that you can deduct all operating costs if they are related to any income or planned income. The income that you had at some point in the past, that you actually had last year, or that you may have in the future. This means that even if you founded the company last year, you can deduct all possible costs. Or even if you have done training or taken further qualifications, you can deduct it as long as you do it in order to generate sales later. With this knowledge, with these contacts etc. you can easily deduct the costs from your taxes. The tax office is not there to tell you which costs were necessary for you in your self-employment and which were not. The tax office does not have the task of the police. The tax office is not an entrepreneurial police force that tells you what you can and cannot deduct. The tax office is there to ensure that the tax has been calculated correctly and paid correctly. That is the raison d'être of the tax office.
This means that it is your entrepreneurial risk to make investments and thus generate profits. I'll give you an example. I actually had a few questions about the journal in a webinar. There was one who attended the seminar and said she used it, but she wasn't sure. There is such a beautiful book that she would like but costs 80 €. Now she didn't know if she could post that as a business expense. The only question you have to ask yourself with an investment like 80 € for a journal is if it's for your business.
Does it help you to organise yourself better, to generate your sales? If so, then that's an operating expense. There is no limit where you can say an 80 € diary is not appropriate, it has to be a 5 € diary. There is no such limit. Of course, this also applies to many other editions. In principle, the tax office is not allowed to tell you whether you travel first or second class by train or fly. That is not the job of the tax office. Of course, if you go there with the intention now and want to consciously exploit the system, because you are going to a conference and then you are at the conference for half a day, but stay on holiday somewhere in Mallorca with your family for seven days and were only there for half a day at the conference, then of course you have to estimate the private and business use. Then of course you can deduct the operational part, which in this example, half a day conference and seven days holiday in Mallorca, does not mean that you can deduct 100% of the flight costs, but you have to deduct the share and that's kind of 10% or less of the expenses you can deduct.
But that is possible. Let's move on to the next point, which is the special expenses. Special expenses are the costs which the tax office or the state would like you to have and therefore subsidise them with taxes. You can claim health and nursing care insurance, pension insurance, Riester contributions, donations and the church tax you have paid in your income tax return. This is the spousal maintenance at Realsplitting, the childcare costs, the training costs, etc. These are essentially the costs that you can claim for tax purposes. This means that the more you have, the more you can claim for tax purposes. Nevertheless, I would strongly advise you not to book any strange old-age provision products just so that you have tax advantages. Sometimes people react irrationally and for many insurance companies the selling point is that it has a tax advantage.
Yes, it has, but if you pay 20 or 30% less tax as a result, then you still paid the other part, i.e. the 70 or 80% of your taxed money. Simply producing expenses in order to have costs does not achieve anything. And I have to say at this point that of course this now applies to the costs that you had last year anyway. For all these costs, the inflow-closing principle applies. This means that you cannot pay something for last year and claim it in your tax return last year, since the costs that were actually deducted from your account last year apply. On the subject of donations, which is also an important point, we have also recorded an in-depth video, which you can also find on a link below. Donations cannot be deducted as a business expense, but you can claim them as a special expense. And sometimes there are so-called disaster decrees.
For example, last year we had a flood in many parts of Germany and such a disaster decree was issued. That means you can donate there and the bank statement, for example, is sufficient as proof of this donation. You can claim this in the tax, even if that was not your intention. With the whole conflict in Ukraine, it's a bit more difficult at the moment because the donations always have to go to an organisation that can also issue you with something like a proof of donation. So if you go there now and make donations in kind, you still need a so-called donation receipt. If you don't have that, then it's difficult. Therefore, if you donate and want to deduct it for tax purposes, then donate to an organisation that can also issue such a donation receipt. Let's come to the third point, the medical and health costs, that is, the extraordinary burden that you should always collect during the year anyway. You can claim medication or medical aids, medical treatment costs, costs for spa and hospital stays, but also funeral costs, for tax purposes.
As I said, things where high costs arise. Fate, please don't judge me, the legal definition is not fate, but that actually sums it up quite well in order to understand what is tax-deductible. Funeral costs, maintenance costs and also disability and lump sums, you can collect them and deduct them from your taxes. A proportion is always deducted from a reasonable burden. This means that depending on how high your income is, you cannot deduct the entire cost, but only what burdens you disproportionately compared to other people. This is the case relatively often and actually the reason why the separate assessment, the individual assessment, for my wife and I, personally made more sense for 2020, was dental treatment. Dental treatment is usually expensive if you don't have supplemental dental insurance. If there are a lot of costs, you can include them in your tax return. For us, it was now the case that two tax returns were more efficient because our joint income was higher, so a lot was deducted.
With a separate assessment, however, the tax effect of these healthcare costs, the dentist bills, was actually greater than the joint assessment, which then meant that it was cheaper. That means you should collect all these documents together. Even if you had Covid-19, then collect all these documents. Most tests etc. can also be deducted here. These are very low costs and most of them were always free. I might also give you a hint on the subject of Covid tests and things like that. For example, if you were a consultant in a company, keynote speaker or moderator and you maybe had to go to a customer and they had the “3G”,” 2G” rule there and you had to take a test to do your job, then that's clearly a business expense and then it should be sorted as a business expense rather than as an extraordinary burden because you can deduct a business expense without a limit.
So better put that in the bookkeeping. Good question from Kathrin: “I'm assuming that all tax offices publish the audit focuses and not just NRW?” Funnily enough, only the financial administration in North Rhine-Westphalia publishes the audit priorities, but of course all tax offices throughout the Federal Republic have audit priorities and that's one of the indicators. It is actually only published in NRW so clearly they publish this list, but you can already see from it what the tax offices nationwide are pouncing on this year. As I said, you can't rely on everything else being totally blindly waved through to the tax office, but these are the points that will definitely be looked at.
And just because only NRW publishes it doesn't mean that the others don't do it. But if you're looking, you have to look very specifically for NRW, otherwise you'll find a whole lot of crap and not what I'm talking about. But you're right. It's also quite funny that only NRW publishes it, but the main thing is that someone publishes it. Next question: “I was employed in 2021 until the end of October, after that I was self-employed. I have received a new tax number for my company. Do I have to make a separate tax return for each tax number for 2021?” No, each of you makes a tax return for one calendar year. This means that you will have income from employed work and from your self-employment and you will do this under your new tax number. It is important if you are based in the company, i.e. if you have registered your company branch somewhere else than you live privately, then you have to make sure that you really use the tax number, which is only for your income tax and not for your types of business tax such as trade tax and VAT.
This is important. You now take your most recent tax number, which you have now received, and also declare your employee income under this tax number. Next question from Andre: “He says KV, PV, RV, Riester liability insurance are capped overall but up to a maximum amount, right?” I agree. They are basically capped or the nursing care insurance and health insurance is the basic protection and it is not capped, but otherwise there is a cap. That's going a bit beyond the scope here. I actually recorded an in-depth video, which is also in the video description. This goes in the direction of insurance in the tax return. I'm going to go into very explicit detail about the caps. Of course you should still collect them. But Andreas, you are absolutely right, it cannot be deducted without a limit, there is a cap. When I say in general that you can deduct something for tax purposes, it doesn't mean that you can deduct 1 € there and pay 1 € less in tax.
Definitely not. Another question: ‘If you decide to use the Kontist tax service and do not yet have an account with Kontist, how do we then deal with the bank account transactions that have previously occurred in another bank?” Just like any other accountants. You send us your account statements or otherwise give us online access to your account transactions and we will then take them and do the tax return. We can do that too. We are a consulting company, we have exactly the same software running in the background. We have a very high level of efficiency when everything runs through the Kontist system, but it's not necessary, we can do it without it. For all people who might find this very interesting in general, you will find a link to our offer as the very first link in the video description. This means that if you actually say that you don't feel like doing everything yourself, then simply give us this task. We are very happy to do that for you.
The next topic today is: What has actually changed this year compared to last year? And although there are a few things that are really, I would say, absolutely new. And a few things that actually change every year. They have now changed that for 2021 as well, compared to 2020 for example. The increase in the basic allowance is now 9,744 €. That is, this is the total income you can earn without having to pay a 1 € tax. From 9,745 € you then pay taxes. For married people, as always, a few euros more. This limit also increases a little every year, it will increase again this year and next year and the year after that. I don't know if it hasn't increased at some point. And of course that also means that the top tax rates and the percentage that is achieved in taxes are shifted back a little. So not only are the first euros tax-free, but the entire income is taxed a little less. That probably won't even offset current inflation. This means, however, that the income limit, from which the next higher tax rate is due, is shifted by 1.25% income because the basic allowance increases.
That's not earth-shattering, but of course it's important to know. But you don't have to do anything about it. So that's actually something that's done automatically by any software you use to do it. And even if she doesn't do it, the tax office will take that into account anyway. It doesn't matter whether you take this into account in your calculation or not. The tax office calculates anyway and cannot take that into account. The following point is more interesting, namely our beloved solidarity surcharge, which I believe was introduced in 1991 with the intention that there would be a solidarity surcharge for one year.
That was long ago. In 1990, I wasn't that familiar with taxes. And these solos should have been abolished forever. It would be nice if we simply abolished all taxes and made all the fat laws thinner. But we didn't do that. It would be a waste of paper if we simply deleted something. That is why there is only a partial abolition of the solidarity surcharge. But it often stays. 90% of you, that is, 90% of taxpayers in Germany, no longer pay the solidarity surcharge. 6.5% of you pay less solidarity surcharge than before and 3.5% pay the same solidarity surcharge as before.
I can't tell you exactly how it is with you. I can only tell you as an example of how it is with an individual investment. If I were single now, did my tax return alone and had an income of up to around 73,000 €, then I wouldn't pay any more solos per year for all types of income, of course. If my income is between 73,000 € and 109,000 €, then I have a reduced solidarity surcharge and for everything above that I pay the solidarity surcharge as before.
That has happened. Of course, you don't have to do that much either. But it is actually a tax relief for the people who are now more or less under 73,000 €. You have to say that, you have to acknowledge it. As a tax person, it really annoys me why people do such crap. For me, reducing bureaucracy also means being able to part with things. And if you need more tax revenue than the state, you can always discuss whether that's really necessary. Then just delete it all. Would you rather increase the top income rate a bit and delete all this solidarity crap.
Unfortunately, that is not the case. Important, and some of you may know this right now during the pandemic, is the topic of working from home. You can claim your home office, your home workplace, if this is your main office for your professional self-employment, proportionately to the rental costs and ancillary costs such as heating costs and internet. You can sell all of this without a cap. The whole topic of home office deductibility is a bit beyond the scope here. That's why I recorded an in-depth video.
You can find that in the video description. If you don't deduct your home office for tax purposes, please do so. This is usually really worth it if you mainly work from home. The problem is that you need a completely separate study for this. Door opens, the door closes, so a separate room. It's not enough if you're sitting on the couch, working a little, if you're sitting at the kitchen table or if you have a loft and everything is a big deal, then you have really big problems with deductibility. And now because of Covid, because of course many more people are suddenly working from home, there was the so-called home office flat rate. In other words, if you can’t generally sell your home office or if you have already shredded all your bills, shredded your rental agreement and simply have nothing left and you now think crap, I actually worked from home last year, how can I, because now you still have to take costs into account, then there is the home office flat rate.
It wasn't exactly invented for that, but that's where it can help you. You can use the home office flat rate without proof of any costs up to an amount of 5 € per working day. Admittedly, that's super little. And this is also possible up to a maximum of 120 days per year. This means that the legislator assumes that self-employed people do not work more than 120 days a year. Somehow the politicians think we're lazy, believing that we only really worked 120 days last year. But actually it is 120 days times 5 €. That is a maximum of 600 €, which you can deduct as a home office flat rate. You can easily do this without proof of any costs and post them as business expenses. Also, and this is an absolutely hot topic right now, everyone is talking about it. Christian Lindner, once Minister of Finance, once a week there is some update on the so-called commuter allowance. The commuter allowance primarily takes into account people who commute. The commuter allowance ensures that you can take the journeys between your place of residence and place of work into account for tax purposes.
Of course, this primarily affects employees, because at least much fewer employees can freely decide where they work and therefore commute less. I had that for years too, that I lived and had an office and that's where I just went. You can apply the commuter flat rate, you can deduct this commuting as a normal cost in your tax return, regardless of your means of transport. This means that even if you walk, ride a bike or take the subway, you can use the commuter flat rate, which is always 0.30 € per kilometre. And that applies from the 21st kilometre and is now 0.35 €. That means 0.30 € for the first 20 kilometres and 0.35 € thereafter.
And I’d be willing to bet, it will be raised again this year, precisely because of the really explosive increase in energy costs. In order to take this into account, the commuter allowance will probably be adjusted and everything that is currently being discussed with fuel discounts and vouchers etc. But the commuter allowance will also be raised again and will be even higher. But for last year it was 0.30 € or 0.35 € from the 21st kilometre. And that's a standard thing again, it changes every time.
Retirement provision, i.e. the deductible portion of your retirement provision, increases by 2% every year. It's now at 92% for last year. Not spectacular at all. I can give you spoilers. This year it's 94% and next year it's 96% until it's 100% and then it stays there. It is also important that this is not a change, but I still thought that I would include the topic of short-term work benefits. Last year, of course, some people were on short-term work due to Covid. Short-term work benefits are generally tax-free, as are start-up grants and things like that. However, these are subject to the progression proviso.
This means that you do not have to pay any taxes on the short-term work allowance. However, the short-term allowance ensures that you have to pay tax on your remaining income at a higher percentage. This is the so-called progression proviso. This usually leads to a higher tax burden. That also applies to many people for last year, even for the year before last. I would like to mention that again at this point, because it is of course a relevant topic for the 2020 tax return and it affects millions of people in Germany. Another point is children. relief for families. A lot has actually happened or it was a temporary regulation for 2020 and it is now permanent. Namely child allowances. In general, there is an increase first. In the case of a joint assessment of 8,388 € and an individual assessment, almost exactly half. But what is actually a big leap is the relief amount for single parents. That means if you're a single parent, you might remember it. There was a relief amount that was somewhere around 1,900 € and normally something like this is only increased by a few percentage points. But that has actually more than doubled for the 2020 tax year and it has been agreed that it will remain so.
Single parents have this tax advantage permanently. Rightly so, I think. And one more important point. I've addressed that before. I also mentioned that there is also an in-depth video below this video. Namely the simplified proof of donation. Simplified proof of donation means that a bank statement is sufficient as proof. So far, that has always been up to 200 € per donation, i.e. not per year per organisation, but per transfer, i.e.
Per transaction. For up to 200 €, the account statement is sufficient. This means that if you donated to a flood victims' organisation last year and paid 200 €, then the bank statement is sufficient as proof and you can take this into account in your tax return. In the past, you always needed a donation receipt, for anything over 200 €. From last year, this applies to donations of up to 300 €. That's important to know, I think. And a few purposes have also been added. There are primarily charitable purposes, but all donations for the purpose of climate protection, free radio and local beautification are now also considered tax-privileged. This means that if you have made donations for climate protection, then this is also tax-deductible.
And that brings us to the focus of the audit by the tax office. Stefan asks an important question, which I’ll also answer directly before I go into the next points, because it is simply a good transition. Stefan asks: “Can reserves for tax payments be considered as untaken profit?” Stefan, if you have a sole proprietorship, i.e. if you are a freelancer or have a business in the legal form of a sole proprietorship, then this is not the case.
Then your profit is: all sales minus operating expenses. Completely independent of where the money is and completely independent of it, you then have to pay taxes. Why is this a good transition? Because the focus of the audit, which, thank God, you don't have to worry about much as self-employed people this year, is actually on companies, namely on the subject of undistributed profits in partnerships. That means it works for partnerships. If you have a GbR, UG or KG, you cannot distribute the profit. Normally it's the same as with sole proprietorships, that you have to pay tax at your personal, individual tax rate, i.e. possibly 40%, 45%, etc. But there is a regulation that gives tax benefits to the money that you don't pay out because you don't want to reinvest it in your business.
That's kind of an accumulation benefit. Accumulation means money is held in the company and enjoys tax benefits. And of course there were voting rights, and the tax office is looking very, very closely at them this year. If that applies to you, that is a very important point. That must be correct. If you sell shares in corporations, then this is a very important point that the tax office focuses on. You have to work correctly. And another important point is that you can hand in your calculation basis and documentation if you want the tax assessment to come quickly. Of course, it can also make strategic sense to file your tax return very late and to delay the whole thing because you know that you will have to pay a lot later. Then you can push that too.
This can also make tactical and strategic sense. Another important point is for all people who have rental income. If you have real estate and are renovating it energetically, which is also very tax-privileged, or generally renovating living space in monuments, then you should be particularly careful this year and perhaps submit the documents directly. But it's beyond the scope of what I'm going to tell you here about tax-saving models for rent and real estate. If this is an interesting topic, then feel free to write it in the comments. Then we can maybe make a separate in-depth video on how to actually use the whole thing. What should be a little more interesting for you guys is the whole hobby thing. And I also recorded an in-depth video on the topic of hobbies. A hobby is self-employment that does not generate any profit over a longer period of time or, conversely, that does not generate any profit over the entire operational period. There are a lot of people who set up their own business out of a passion, out of a hobby, because they suddenly had sales and income, but didn't make a profit in the long term.
Then, as I mentioned earlier, you can offset your losses for tax purposes, for example with other types of income. But if you don't make any profits for a long time, then the tax office will go and say that it's a hobby. Hobby means that the tax office decides that your self-employment is a hobby and the hobby is not tax-advantaged. This means that you can no longer offset the losses and, if in doubt, retrospectively for a few years. You may no longer claim the loss from your self-employment. And then there is a proper back tax payment, because you are no longer allowed to take the operating expenses into account. This is an important issue. That was the absolute main topic for 2020, but it is still a very present topic.
And then of course the tax office also looks at all things that look different due to the Corona situation. You should document exactly how your living conditions or your tax situation have changed as a result of Covid-19. For example, if you have set up a home office or have now declared the children's room as an office and the child is now in another room, then document that. I've already spoken to a few people, including some of our clients, who really have photos of their home office and had to prove that it really is only a study. Only then is it deductible. If you have a home office, you can usually be prepared for questions. So please calculate correctly. It is also important that on the days when you set a home office flat rate and want to deduct travel expenses, that you do not deduct both on the same day, or only with justification on the same day.
Of course you can work in the home office for the first five hours and then still have a business appointment. But that has to match. Do you have clean documentation? The probability that questions will come up is much higher than in previous years. Even if you buy a chair, laptop or desk, for example, i.e. the furnishing of the home office, then you can of course deduct the costs. But you should really formulate your justification or documentation about it in advance and send it directly to the tax office. The likelihood that they will ask is relatively high. Of course, you don't have to send it along without being asked. If you're in a hurry, then maybe.
Another important point on the subject of double household management. Maybe some people who still have a second home do because they regularly work on a project somewhere else. If you don't have these external activities now because of Covid-19 and then don't use the apartment, then there are actually a few situations where the tax offices get in line and you can no longer deduct the rent for the second apartment because the tax office says that they were not used operationally that year. There are some tax offices who are now going and assuming that you did not use this apartment for business purposes last year and therefore cannot deduct it either.
Of course it's a bit unworldly, I have to say personally. It's like giving notice of an apartment in Germany or in major German cities on 1 January and being able to rent it again when you need it again on 1 November. This apartment is then off the market. The idea of moving house or moving house and then doing it again a year later is very unworldly. If you have problems with this, talk to your tax advisor. There are enough reasons why you can see it completely differently and why you can definitely enter into discussions with the tax office.
The tax office is not the judge. You can have a different opinion than the tax office. And if you can't reach an agreement when in doubt or if the tax office doesn't follow its own reasoning for a long time, then you can discuss the whole case before the tax court. And there are many cases where the tax authorities actually don't get it right either. The tax office does not judge your tax deductibility, they are simply the other party. Especially for the benefit of the people who are in a hurry, I would like to go through my slides very briefly.
I'll answer any questions later. I'm just going through the very basic tax tips that I've noticed that many people are unaware of, or that you may be aware of but not actively using. What can you do today to save on taxes for last year? The first tip is basically investment deduction and special depreciation. It's about investments. With the investment deduction amount or IAB you can take future investments into account for tax purposes. Of course there is also the video below in the video description or with Michelle in the chat. So if you want to buy something this year or next year, you can already take 50% of the costs into account for last year. This means that if you buy a smartphone today, you can take into account 50% of the operating expenses from last year. If you want to buy a company car next year, you can put 50% of it in your tax return last year as an investment deduction and claim it for tax purposes. Absolutely great. Interesting model. Some of you may have heard this already, but many forget it in practice.
So think about what you have already invested this year. For long-term investments, you can already estimate 50% of the costs from last year. At least as long as your profit is less than 200,000 € per year. Special depreciation is a model that you can use to write off a little bit more than what you have already bought anyway. For example, the smartphone you bought last year in December. I think the acquisition costs for a smartphone have to be spread over three years. I think three years for a smartphone and then from the beginning of the month. This means that if you bought a smartphone in December, you can sell exactly 1/12 of a third, i.e. 1/36. That's very little and not really worth it.
With the special write-off, you can take a 20% lump sum down first. If you bought a smartphone for 1,000 €, you can deduct 20% directly and then take 1/36 of the remaining amount per month. There is also an in-depth video for this. This is also in the video description. Those are two big adjustment screws. And then a tax tip, and I have to honestly say that I knew the theory, but I actually came up with the idea during my research over the past few years. For example, if you work at home and suddenly bought a table to use as a desk or chair, you can deduct that as a business expense. But what if you use a table that you bought privately as a desk and a chair that you have, but now use it for business because it just makes sense and it doesn't make sense to buy everything new? Then you can place these private items in the business assets and write them off there.
A lot of people don't know that, and it’s usually forgotten. There is also an in-depth video for this. You can also find that below. And that's just the case with people who may have reorganised in the last year or so. Consider adding things to your business assets that are not officially in your fixed asset analysis, i.e.
In your capital goods in your company. You can do that. It's worth it. And because things sometimes break, there is another hint. Write off a smartphone over three years. I'm not one of those people who buys a new smartphone every six months, but at least every two years. What do I do if I change my most important work tool, my mobile phone, once a year? Then I still have the old one in my business assets. But then, in case of doubt, it is no longer worth anything.
You can depreciate it extraordinarily when something is worth less due to rapid consumption or rapid wear and tear because it has been dropped. All these things that are in your fixed assets and have lost value quickly for whatever reason, because it was stolen, because it fell down, because you use it very intensively. I use a lot of laptops and I'm really sorry that they always look so crappy so quickly. It actually still works to some extent, but it's not that old either. If I used it up so quickly, I can still include this depreciation in bookkeeping as an unscheduled depreciation, and of course I can still do that today for December. Exactly the same, by the way, with the insert. A fourth tip, and this is more of a general tip, I mentioned earlier: In the case of business expenses that you had partly for business and partly for private purposes, you can deduct the operational use portion as an operating expense. You then have to be able to estimate and prove the proportion somehow, i.e. estimate the time, estimate the scope.
What often arises are, for example, subscriptions or books that will help you in your self-employment. There are other sources of information as well. Your private phone at home or the internet contract for your home. Have you worked from home and not yet deducted part of your internet costs from accounting? You should definitely do it. My mum is a midwife who does yoga classes for pregnant women, i.e. pregnancy yoga and also postnatal courses etc. and uses music. She uses Spotify for music, which means she has a Spotify Premium subscription, because it's always a bit silly to suddenly hear Seitenbacher commercials when she's relaxing. That's why she uses a premium account and pays for it monthly. But she also uses it for business. That's why she went and estimated the operational usage share. 50%, and she puts that 50% of Spotify's cost into the accounts. Rightly so. Almost nobody does.
Scan through everything that you use operationally. It pays to pack everything into accounting. Especially with issues like Spotify and such, it is sometimes easier to just book it once a year. But don't forget the whole thing. And the fifth tip is: optimise company car taxation. You can always switch between the logbook and the 1% method at the turn of the year. But that would really go beyond the scope here. I've given entire webinars just about how to ideally do this. But with every turn of the year you have the opportunity to make a new choice and decide which is cheaper. We have also developed an Excel tool where you can simply enter your numbers and then the tool will tell you what is cheaper for you. Due to changes in usage due to Covid-19, for example, i.e.
Because you are less on the road and work more online, it may well have happened that usage has changed, that a change of 1% to the logbook might make sense. And that always gets interesting at the turn of the year. It's already March, of course, but if in doubt, it would be worth thinking about it again. Which tools are the right ones, the best? I would say for the pioneers among you, for the people who really know the content, who are interested in the topic, who also like difficult problems, ELSTER-Online. I think Albert Einstein once said “You have to be a philosopher to do a tax return. This is too difficult for mathematicians.” If you are a philosopher, like Albert Einstein, then use ELSTER-Online. ELSTER Online is the portal of the tax office. Simply enter ELSTER-Online directly. You either know how to register there or you can also find the instructions on our channel, where we showed it step-by-step via screen sharing. Theoretically, you do not need a separate business account. But I would strongly recommend you to have a separate business account. The Kontist bank account is also available as a free version.
There are a number of free business accounts. I would strongly recommend those to you. You need some tool to do the accounting with. The only exception that I would personally accept, purely out of pragmatism, is if you only have tax-free sales and no input tax deduction. For example, if you are a small business owner, you can do it with Excel. Anyone else dealing with VAT, do yourself a favour, save yourself valuable lifetime and grey hair, please don't try to do this without a tool. Get an accounting tool. My personal recommendation is Lexoffice. This is the most professional and best cloud accounting program available in Germany. Full stop. The Kontist bank account is my recommendation for the philosophers among you. Kontist bank account free version, Lexoffice for accounting, ELSTER-Online for tax returns. You pay nothing for your bank account, you pay 18 € or 19 € a month for bookkeeping and the tax return is free. So you pay 230 € per year.
For people who want it a little more relaxed, I recommend the Kontist Premium account. The Kontist bank account always shows you your net and your tax, even during the year. The tax reserve is calculated and adjusted with each transaction. This means that if you use Kontist, you always know how much money in the account actually belongs to you and how much you should actually put aside for the tax office. In my opinion this is a great solution. I must also say that I had been a Kontist customer for a long time before I was employed by Kontist.
That's why I won't let it take me. I'm still excited about the solution. Costs nine euros per month. Accounting at Lexoffice costs the same. And then we come to all these tools such as Taxfix, Wundertax, Steuerbot, Smartsteuer etc. Almost no tool can be self-employed and can do Annex EÜR, Annex S and Annex G. The very best setup is Smartsteuer. Why? The secret key, the connecting element is called: Haufe. Haufe is a part owner of Kontist. Haufe is the owner of Lexoffice and Haufe is the owner of Smartsteuer, i.e. Kontist, Lexoffice and Smartsteuer work very well together. You can use the bank account at Kontist and write your invoices with Lexoffice. This is then automatically compared and categorised and posted. If you have connected Lexoffice and Kontist and remain so all year round, then you click on a button in Lexoffice that transfers the EÜR and all other VAT data to Smartsteuer in no time at all and then you log in to Smartsteuer and can do all the tax returns there.
All means income tax, VAT, trade tax and the whole thing for 370 € a year. That's not even that much more than that for the philosophers among you. In other words, for all people who just want to do it themselves and have a little idea, but don't really feel like it, this is the absolute dream combination. And only for those who say that they don't feel like doing it at all and want someone else to do it, they can then use the smartest combination of all: the Kontist business account and Kontist tax advice. That means you simply book the Kontist tax consultancy and we will do everything for you. You use the bank account, send us all the receipts and we will do the tax return for you. Basically, a setup with a tax consultant costs around 1,000 € to 2,000 €. I've also heard that it sometimes costs 2,500 € to 3,000 €. Our price starts from 99 € per month, except for founders.
We have a separate extra offer for founders in the first two years. It's a bit cheaper, but it's a flat rate of 99 € per month by default. You pay 1,200 € per year for a bank account, bookkeeping, tax advice, tax return, etc. You can also call if you have a question. You won't be charged extra for a five minute phone consultation like other accountants, instead you have one monthly fee for everything you need. That's what we offer. That's what we do every day. Michelle collected a few questions. Tanja writes: “Can an Ayurveda cure with medical treatment be discontinued as an extraordinary burden?” You can actually deduct some things as an extraordinary burden. I can't make any direct statements to you about an Ayurveda cure, I would probably have to look at the prospectus, i.e.
Which medical treatment is the focus. But basically you can say very roughly as a rule of thumb that if a doctor has prescribed it for you, then the probability is at least much higher. But I also have an in-depth video on the subject of deducting health costs from taxes. I went into a little more detail about what you may have to prove yourself. There are also alternative healing methods, which you can certainly discontinue, if you can prove that the conventional healing methods have not worked before, then there are also some possibilities for you to discontinue something.
There are a few requirements that have to be met. Timo writes: “What does the focus on the sale of shares in a corporation mean? But that doesn't mean private sales of ETFs or shares, does it?” No, they are not. This is especially the case if you hold a few more shares in a GmbH, for example, your normal investment income from it, that's not what is meant. And you don't have to be afraid of the focus areas of the exam. This simply means that the tax office takes a closer look at these points internally. But if you now sell your MSCI World ETFs or something, it doesn't mean the sale of shares in corporations, but really if you are a shareholder in a GmbH and sell these shares, then that's what is meant. Timo writes: “I was still employed in January 2021 and already self-employed at the same time. Both from home. Can I then add the home office flat rate for January to the costs for the study in the rented apartment?” So if you can estimate the costs anyway because you have a separate study, then you cannot deduct the home office flat rate.
That doesn't make sense either, because your actual costs will usually be much higher than 600 € a year. Therefore, if you have a separate study, forget that and don't bother with the home office flat rate. Enver asks: “IAB, profit or taxable income?” Profit. You can use the IAB if you make a profit of up to 200,000 € from your self-employment, not the total profit from everything you do.
If you're over 200,000 €, then no more. Metin also asks about the IAB. “Sorry I got over it so quickly. You can consider 50% of your investment costs as costs beforehand.” Exactly. That said, Metin, you are 100% right. The maximum amount you can form the IAB, you can also have a lot of investments, but the maximum amount that you can take into account for tax purposes is 200,000 €, which means you can take into account investments of up to 400,000 € for tax purposes by 50% of them as IAB. Sefram asks: “I have been self-employed part-time since May 2021. Due to my professional requirements as an employee, however, I had no sales.
When can I expect a reaction because of hobbyism?” I am very familiar with this because I only made sales in the third year of my part-time self-employment. I would say two to three years. But maybe because this is a hot topic right now, i.e. one of the points that the tax offices pay particular attention to, they will also ask you about the 2022 tax return. But it is usually relatively easy to do in the first few years. As I said, I have a video about it. You're welcome to take a look. At the time, I simply wrote down why it was like that, why I hadn't made a profit yet. But I wrote down briefly what my plans are for the next few years. And then you agreed to it. On a DIN A4 page, I briefly described to them what the idea is.
In my case, that was now that I pre-produced a lot of videos in the e-learning area, and I had to pre-produce an awful lot at the beginning before I could sell it. That means I had a lot of production costs at the beginning, I bought equipment, but I still didn't make any sales for the first two years. I already had contracts and had already acquired customers, but that just took a very long time. You can explain that to the tax office quite normally and then they are usually fine with it. It's important that you really don't use this for tax abuse or evasion, because then the tax office is always a bit bitchy and then it's also your enemy, so to speak. Eleni writes: “Does office furniture, for example container 800 € and cupboard 800 €, have to be depreciated together? Do they represent a community of values?” No. If the two can be used independently, independently of each other, then no. Then you don't have to copy them all together. It's a bit different when you buy a camera and a lens, for example.
You can't use the lens without the camera, so you have to write that off together. This is often the case with screens that you cannot use alone. MMZ doctor writes: “If I register a sole proprietorship and state 0 € as the expected turnover, do I then only have to make the zero report in the advance VAT return?” Yes, exactly, you have to do that. Florian writes: “When is the deadline for the income tax 21 assessment?” Great. Thank you Florian. Now you have made me aware that I forgot an important point. The delivery last year was at the end of October due to Covid. It is different again. This year 31 July is the deadline for the tax return for everyone. So income tax, VAT and trade tax. Because 31 July is a Sunday, the tax office expects this from you the day after. So yes, theoretically 31 July, practically 1 August. But not in October. You would be too late with that. Jürgen has a very interesting question: “What is my opinion on tax tips for the self-employed?” Very ambivalent, especially for the self-employed.
So as I said, if you have a large company, are clearly in the six-figure range, i.e. make hundreds of thousands of euros in profit, then you can do a lot with the company organisation. If you are self-employed, your creative options are very limited. I have to be very clear about that. Also because saving a lot of taxes in one year means that you make more profit in the next year. A very simple example: if I can now deduct 50% of the costs of my company car last year thanks to the investment deduction, you can play with it, then I can no longer deduct these 50% costs this year and not next year either, not in the year after next. This means that my profit was lower last year, but my profit is higher by the same amount in the following years. Therefore, the design options are admittedly always very limited. Tax-saving tips always make sense when you are paying off income peaks. Because we have a progressive tax rate in Germany, a very high income is disproportionately heavily burdened by taxes. This means that you pay the least tax if you earn the same amount every year.
Then you have the lowest tax burden. And that's why you should use all these depreciation options and design options in particular to reduce these income fluctuations and to have an even income as possible. If you don't have that and just push back, you'll only end up paying your taxes later. But honestly, at current interest rates, liquidity is often not such a big problem. You get some loans with a negative interest rate. What's in it for me if I now pay my taxes a year later, but then at the same amount? So I have to be very clear that there are a few options, admittedly very limited, but what I hear most often from accountants is that I can keep investing. Yes, it's nice that I can invest. If I now spend 10,000 €, I might pay less tax on the 10,000 €.
And I might pay maybe 4,000 € less in tax if my tax rate is 40%. But I no longer have the other 60%, the 6,000 € either. That means what's in it for me if I buy useless crap now? That's why I have to honestly say that 80% of the tax tips you find on the internet are rubbish for the self-employed. I'm surprised people are still watching here. I promised you that I will try to answer all questions. I thank you for your attention. I know we've left a lot of people behind now. I didn't expect it to be so detailed either. I would also like to thank Michelle again, who has been diligently putting together all your comments and questions in the background, and I would be happy if we could see each other again next week or the week after next or the week after next in one of our Tuesday webinars.
Thanks very much. Stay healthy. Have a nice week and see you next time..