How do I save money on taxes

Saving Income Tax: The Most Effective Tips

When filing your tax return you often ask yourself how you can save income tax. Depending on the type of occupation, there are a few simple tricks that one can use. The deadline for filing the income tax return is May 31 of the following year.

Employees have relatively little leeway because there are usually fixed guidelines or flat rates that can or must be used. The subject is more complex for the self-employed.

However, it is therefore also more time-consuming, which is not necessarily an advantage. In the following we highlight the most common tips for saving income tax for employees and self-employed.

How employees can save taxes

A key issue when it comes to income tax savings for employees is travel expenses. Expenses for the commute can be deducted. However, one should not necessarily specify long detours here. Finally, the clerk can quickly check the specified route with the route planner. You can still enforce detours as long as they are conveniently accessible. Therefore you should think about which route is actually the best.

The tax office can also inquire about travel costs if more than 220 working days are specified. In this respect one should be able to provide a corresponding justification. These points also apply to car pools or when using a company car.

Another way to save income tax is to deduct training and further education costs. In addition, there are all the associated expenses, as well as the way to the course and the additional food expenses. All of this falls into the so-called advertising costs, for which a maximum amount of € 4,500 is currently set. Anyone who is above this must be able to prove this (for example with fuel receipts).

This also includes application costs, for example to place a newspaper advertisement to look for a job. You can deduct this item and thus save income tax even if the advertisement was unsuccessful. In addition, you can also credit all office supplies that you need to produce applications, plus postage for shipping.

Another tax bonus that many taxable employees use when saving income tax is the home office. This is deductible up to an annual rate of € 1,250. Even renting a room from a relative is not a problem.

However, it makes sense to actually use the space only for the stated purpose. A random sample from the tax office makes it difficult to explain the dolls and toys that fill the room. Furthermore, you can also claim book receipts from the tax office in order to bring in the necessary specialist literature for saving income tax.

How the self-employed can save taxes

What are the income-related expenses for employees, the business expenses are for the self-employed and freelancers. This is usually where the greatest potential for income tax savings lies. The point mentioned includes, for example, office rent or office supplies.

The same rule applies to the study as to employees, provided that the main part of the activity takes place in this room. However, the renovation of the study is 100% deductible.

Another point is the car. In principle, 30 cents per kilometer are deductible for journeys that are due to work and that are made in a private car. If the car is used more than 50% for business purposes, it becomes part of the company's assets. In addition to the car, all maintenance costs such as gasoline, insurance and repairs can now be deducted.

Private journeys should definitely be proven with the logbook, which also increases the personal overview of the car. Training costs, which can be deducted 100% at the beginning of a new self-employed activity, are particularly interesting for start-ups.

For larger purchases, the rate is spread over several years, such as 3 years for a computer. In addition to the operating costs, there are other deductible items that can be used to save income tax. One of these are pension expenses such as life or pension insurance.

Save income tax

How one can save income tax is a broad field. There are countless tricks and special regulations that can be studied. Ultimately, the question is how much time you want to invest in your tax return. For a maximum you should hire a tax advisor, who in turn costs money and can thus wipe out savings.

With the tips mentioned above, you can effectively save income tax and at the same time keep the time required within limits.

Income tax and income tax: useful information for employees When do employees only have to pay income tax and when do they also have to pay income tax? > read more

© Verlag für die Deutsche Wirtschaft AG, all rights reserved