Tax deductions in Germany: What self-employed people need to know

Contents

• Intro
• Overview: Common tax deductions in Germany
• Depreciation
• Flat-rate allowances
• Investment deduction allowance
• Common deductible cost categories
• Home office & coworking space
• Equipment, software, and essentials
• Company car & travel
• Training, education, insurance & health
• Hospitality, gifts & meal allowances
• Other deductible expenses
• Family & employees
• How to organise receipts
• Best practices for compliance
• When do I need a tax advisor?
• Conclusion

 

Understanding tax-deductible business costs

The principle is straightforward: if you are subject to German income tax, you can deduct expenses directly connected to earning your income. These business expenses—called operating expenses 💬Betriebsausgaben—reduce your taxable profit and therefore your tax liability.

For example, if you are a consultant and purchase a new laptop for €1,200 used exclusively for work, the cost can be deducted either:

• fully and immediately (if it qualifies as a low-value asset under €800 net, or
• spread out via depreciation over the standard useful life (typically 3 years for laptops).

📌The €800 threshold refers to the net amount (excluding VAT) and applies per § 6 Abs. 2 EStG.

You must keep every receipt 💬Beleg and ensure it shows the nature of the purchase, the supplier, the date, and the amount. If you cannot prove the business link, the tax office may reject the deduction.

 

Common tax deductions in Germany and who can claim them

Deduction category	Sole proprietorships	Liberal professionals	Partnerships	UG / GmbH (LLC)
Home office & coworking space	✅	✅	✅	✅
Equipment, software & work essentials	✅	✅	✅	✅
Depreciation of higher-value assets	✅	✅	✅	✅
Company car & travel expenses	✅	✅	✅	✅
Training, education & professional costs	✅	✅	✅	✅
Insurance (health, pension, liability)	*️⃣	*️⃣	*️⃣	❌
Hospitality, gifts & meal allowances	✅	✅	✅	✅
Other business costs (website, bank, etc.)	✅	✅	✅	✅
Professional services (e.g. tax advisor)	✅	✅	✅	✅

✅ deductible
*️⃣ partly deductible, i.e., statutory health and pension contributions may be deducted as a special expense 💬Sonderausgabe (sole proprietors, liberal professionals, and partners). Supplemental private insurance is not deductible.
❌ only deductible via payroll (e.g., for managing directors of UG/GmbH), not as company expenses.

 

Depreciation: spreading tax deductions over time

Some purchases cannot be deducted in full in the year you buy them. Instead, they are deducted gradually through depreciation 💬Abschreibung.

In Germany, items with a value up to €800 net qualify as low-value assets 💬geringwertige Wirtschaftsgüter (GWG) and can be deducted immediately in the year of acquisition under § 6 Abs. 2 EStG.

Assets that exceed this value, such as company cars or expensive machinery, must be depreciated over their useful life in accordance with standardised depreciation schedules for wear and tear 💬Afa-Liste.

Depreciation schedules are set by the tax authorities and vary depending on the asset. For example:

• Laptops: 3 years
• Office furniture: 13 years
• Vehicles: 6 years

 

Flat-rate allowances without receipts

Flat-rate tax allowances 💬Pauschalen let you deduct a fixed amount without providing receipts. Common examples include:

• Daily meal allowances when travelling
• Home office flat rate: €6 per day, up to €1,260/year (as of 2024)
• Phone/internet costs: small flat-rate deductions may be accepted, but must be plausibly estimated and justified

📌If your actual costs exceed the lump sum, you should claim the real expenses instead — but you will need proof.

 

Investment deduction allowance

If your business assets are below €235,000, you may be entitled to the investment deduction allowance 💬Investitionsabzugsbetrag or IAB.

If your profit is below €200,000 (as per § 7g EStG, applicable for small businesses), you may be entitled to apply the investment deduction allowance, too. This allows you to deduct up to 50% of the planned cost of a future asset before making the purchase, reducing your current income tax burden.

You must purchase the asset within three years. If you don’t, the deduction is reversed and you will need to make back payments to the tax office.

 

Common deductible cost categories

These costs are generally deductible for tax purposes if they relate directly to your business:

• Depreciation and amortisation
• Business trips and travel costs
• Employee wages, salaries, and social security contributions
• Rent for office space or coworking
• Vehicle costs, e.g., insurance, fuel, depreciation
• Professional services such as a tax advisor
• Insurance premiums linked directly to the business, e.g., business liability
• Loan interest and banking fees
• Advertising and marketing expenses

 

Home office and coworking space expenses

If you work from home, you may be entitled to deduct part of your rent, utilities, repairs, insurance, and property tax 💬Grundsteuer.

Two main rules apply:

1. Unlimited deduction applies if the home office is the center of your business activity and is used exclusively for professional purposes.
2. Capped deduction of up to €1,260/year (previously €1,250) applies if no alternative workplace is available—even if it is not the main place of work.

Coworking space fees are fully deductible, but you must keep written contracts and invoices as proof.

 

Equipment, software, and essentials

You are entitled to deduct work equipment if used at least 90% for business.

Examples include:

• Computers, laptops, and tablets
• Office furniture and fixtures
• Mobile phones and related accessories
• Specialist literature
• Industry-specific tools and machinery

📌 If business use is less than 90%, only the business-related portion is deductible. The rest may be treated as a private withdrawal 💬Privatentnahme and taxed accordingly.

 

Company car and travel deductions

A company car used 90% or more for business is fully deductible, including fuel, maintenance, insurance, and depreciation.

If the vehicle is not exclusively used for business purposes, you must either:

• Use the 1% rule (monthly 1% of gross list price + €0.03/km for commuting), or
• Maintain a logbook 💬Fahrtenbuch to document actual business/private usage.

For travel, you can deduct:

• Transport costs (e.g., train, taxi, rental car)
• Accommodation (hotel receipts required)
• Meal allowances based on absence duration and destination, e.g., domestic travel in Germany:
  • Over 8 hours: €14
  • Full day lump sum: €28
  • Departure/return travel days: €14

📌For international travel deductions check out the annual flat-rates 💬Verpflegungspauschalen published by the Federal Ministry of Finance.

 

Training, education, insurance and health costs

If you attend training directly linked to your current business activity (e.g., courses, workshops, certifications), the full costs—including fees, travel, accommodation, and materials—are generally deductible without a fixed cap, provided they are necessary for maintaining or enhancing your professional skills.

Contributions to basic health insurance 💬Basisversorgung are deductible under the category of special expenses 💬Sonderausgaben in your income tax return. This also applies to contributions to the statutory pension scheme and occupational disability insurance, provided these are either legally required or directly related to your professional activity.

In contrast, premiums for private supplementary insurance —such as dental, travel, or private hospital upgrades—do not qualify as deductible.

 

Hospitality, gifts, and meal allowances

Hospitality costs for client meetings are deductible at 70% if you keep detailed records of the date, place, purpose, and attendees.

The receipt must include:

• Name of participants
• Business reason
• Date, location, and amount
• VAT if applicable

Gifts to clients are deductible up to €35 net per recipient per year—provided they are business-related and not cash.

 

Other deductible expenses to check

Expenses such as website development, hosting fees, advertising materials, professional association memberships, accounting software, and bank account fees are generally tax-deductible, provided they relate directly to your business.

Additionally, premiums for professional liability insurance (e.g. for consultants, doctors, or architects) are also deductible as business expenses under § 4 EStG.

As always, ensure you retain detailed invoices and documentation for each expense.

 

Special situations: family and employees

If you employ family members, their wages may be deductible if the arrangement meets the conditions set by the tax authorities.

To ensure deductibility, the employment relationship must be contractually documented, payments must be made regularly via bank transfer, and the wage level must reflect standard market rates. Cash payments or informal arrangements will be rejected.

Parents may also benefit from child allowances 💬Kinderfreibetrag or child benefits 💬Kindergeld in their income tax return, depending on the tax class and the income level. In some cases —such as among married couples or registered partners— a tax class change may increase the overall tax benefit.

 

How to smartly keep and organise receipts

Keeping well-organised receipts in order is essential for proving your business expenses. Under German tax law and Principles for Proper Accounting 💬GoBD, the tax office may reject deductions if documentation is incomplete, missing, or modifiable. A smart system saves you time, reduces stress during audits, and helps you stay on top of your finances.

Paper vs. digital receipts

• Paper receipts must be stored in chronological order and protected from fading (plastic sleeves or folders), and kept for 10 years.
• Digital receipts must be archived in an unalterable and secure format. Scans are permitted if they are clear, complete, and stored securely.

Explore digital solutions

Modern accounting software such as DATEV, Lexware, and sevDesk simplifies receipt management. These tools allow you to scan, upload, tag, and link expenses directly to your bookkeeping records.

Cloud solutions with OCR (optical character recognition) improve searchability, and integrated systems can reconcile receipts with your bank transactions automatically.

 

Best practices for compliance

• Most important: Keep all invoices and receipts for at least 10 years!
• Digitise and archive each receipt immediately after payment—don’t wait until year-end.
• Clearly label expenses with their the purpose (e.g., client lunch – 10/05/2025).
• Keep both the invoice and the proof of payment.
• Set regular reminders to reconcile receipts with your accounting records.
• Use lump sums only if they are higher than your actual costs.
• Consult a tax advisor to ensure compliance and identify optimisations.

By adopting a digital-first approach, you minimise paperwork and reduce the risk of losing documents. Following these practices will help you meet GoBD standards and avoid issues during tax audits.

When should I consult a tax advisor?

While many self-employed people start out doing their own tax returns, there comes a point when professional advice pays off. A tax advisor 💬Steuerberater:in can help you optimise tax deductions, avoid mistakes, and plan ahead for future investments.

You should seek tax advice if you:

• are moving into a higher tax bracket due to rising income.
• plan to invest in larger assets such as a car, office equipment, or property.
• employ staff or family members, which adds payroll and compliance complexity.
• want to restructure your business or change its legal form.
• operate as a UG or GmbH, which requires formal double-entry accounting.

📌In many cases, the savings from optimised tax deductions and strategic planning outweigh the tax advisor’s fees. Consulting a professional early can also give you peace of mind and free up time to focus on growing your business.