Deductible business expenses: what the self-employed in Germany can deduct from tax

What are business expenses?

Under § 4 Abs. 4 EStG, business expenses (Betriebsausgaben) are “expenses incurred because of the business”. It does not matter whether an expense is necessary, usual or sensible – that is your decision as a business owner. What counts is the connection with your work. An expensive monitor is just as much a business expense as a cheap one.

For the self-employed using the cash-basis profit statement (EÜR), the outflow principle applies: an expense counts in the year you pay it. If you charge VAT, you enter the net amount as a business expense and reclaim the input VAT (Vorsteuer) via the VAT return (Umsatzsteuer-Voranmeldung). As a small business (Kleinunternehmer), the gross amount is your business expense.

They must be distinguished from private living costs (§ 12 EStG): food, normal clothing, private insurance or your own home remain private, even if they are what makes your work possible.

The big list: what the self-employed can deduct

For most freelancers and trade businesses these are typical business expenses. The line refers to the Anlage EÜR 2025; how to fill it in is explained in the guide filling in the Anlage EÜR.

Mixed costs: phone, internet, car and home office

You use many things both for business and privately. Then only the business share is deductible. Estimate the share in a comprehensible way and document how you arrived at it – for example with a record kept over three months.

• Phone and internet: the business share is deductible. A separate business contract is simplest because it then counts 100 %. Without individual proof, 20 % of the bill, at most €20 a month, is often used in practice (based on R 9.1 Abs. 5 LStR).
• Car as a business asset: all costs are business expenses, private use is taxed as a withdrawal – using the 1 % rule or a logbook, see taxing a company car.
• Private car for business trips: €0.30 per kilometre driven without individual proof. For trips between home and your place of business only the commuting allowance (Entfernungspauschale) applies, from 2026 €0.38 from the first kilometre – more under deducting travel costs.
• Home office: without a home study, €6 per day on which you mainly work at home, at most €1,260 a year. If the home study is the centre of your entire work, the actual costs or a flat €1,260 are deductible – see home office allowance and home study.

Business expenses deductible with limits

§ 4 Abs. 5 EStG sets limits for some expenses. You must record them separately in your bookkeeping, otherwise even the deductible part is lost.

What is not deductible as a business expense?

Some expenses are connected with the business but still may not reduce profit. Others are private, even if they feel work-related:

• Income tax, solidarity surcharge and church tax – these are personal taxes.
• Trade tax (Gewerbesteuer): not a business expense since 2008; it is, however, partly credited against income tax (see trade tax).
• Fines, administrative fines and warning fees, for example parking tickets on business trips.
• Private insurance: health insurance, long-term care insurance, pension insurance, disability insurance and private liability. They are partly deductible as special expenses (Sonderausgaben) in the income tax return, not in the EÜR.
• Normal clothing, even if you only wear it for client meetings; only typical work clothing such as protective clothing or uniforms is deductible.
• Living costs such as the hairdresser, gym or glasses – even if your appearance matters for work.
• The part of gifts over €50, 30 % of entertainment costs and expenses for hunting, fishing or yachts.

Expenses before you start: pre-startup business expenses

Costs you incur before your self-employment officially starts are deductible as pre-startup business expenses (vorweggenommene Betriebsausgaben) if there is a clear connection with the planned activity. Typical examples are start-up advice, trade registration, notary or commercial register fees, a laptop, website and logo, specialist literature, training and trips to meetings with future clients.

You enter them in the Anlage EÜR for the year in which you paid them. If this creates a loss, it is offset against other income of the same year, such as your salary from employment, or carried forward to later years as a loss carryforward. Keep the receipts even if the business ends up not being started – unsuccessful start-up costs can also be deductible. The start-up process is explained in becoming self-employed in Germany and the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung).

Receipts: what the tax office wants to see

Every business expense needs a receipt – an invoice, a receipt or, for small amounts, a till receipt. For the input VAT deduction the invoice must contain all mandatory details; up to €250 gross a small-amount invoice (Kleinbetragsrechnung) is enough. Since 2025 you must be able to receive e-invoices from other businesses and archive them in their original format.

You keep accounting vouchers for eight years and the EÜR itself for ten years – unalterable and readable, as the GoBD require. For entertainment you also need the occasion and participants, for gifts the recipient and value. If a receipt is missing, a self-made receipt (Eigenbeleg) with date, amount, payee and purpose can help; but it is the exception and no substitute for an invoice that allows input VAT deduction.

How much tax do I save with a business expense?

A business expense is not a gift from the tax office: you spend the full amount and only save your personal tax rate on it. How much that is depends on your marginal tax rate. Example with an assumed marginal tax rate of 35 % (without church tax and without solidarity surcharge):

Typical mistakes when deducting

These points most often lead to the tax office cutting deductions for the self-employed:

• Fixed assets over €800 net deducted in full in the year of purchase instead of being depreciated (exception: computer hardware and software) – details under depreciation (AfA) and low-value assets (GWG).
• Private shares not taken out, for example for the mobile contract or the car.
• Entertainment receipts without occasion and participants, or gifts without a list of recipients.
• Health insurance or pension contributions entered in the EÜR instead of as special expenses in the income tax return.
• Expenses without a proper invoice, so that the expense is recognised but not the input VAT.

Recording business expenses with Kontelio

In Kontelio you record every expense with a category, VAT rate and – where necessary – a private share. You upload the receipt or take a photo of it; it is archived for ten years in line with the GoBD. Kontelio reads e-invoices in ZUGFeRD or XRechnung format directly. Every expense is booked according to SKR03 and ends up in the right line of the Anlage EÜR and in the VAT return. You set up larger purchases as fixed assets; Kontelio suggests the depreciation. More on the page recording expenses and receipts.

Frequently asked questions