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Trader, freelancer and other self-employed have different ways to determine the profit assessment. Which of these will be applied depends, among other things, on the business sector and on the annual profit.
Obviously, the profit must also be stated in the tax declaration, because finally the financial office also wants a slice of the pie and levies taxes on the profit. In the following, the individual possibilities of winning the game are described in detail.
Profit assessment by accounting
A balance sheet is the much more complete way to determine the profit assessment. This is because individual accounts are held for various categories of goods, operating equipment, liabilities and receivables, which must be booked on a regular and timely basis during the year. Any change in the commodity or commodity stock is recorded on the balance sheet. The way to the profit or loss in the tax declaration is for the self-employed very long and costly. After all, someone must carry out the current bookings as well as create a final balance sheet every year. As a rule, these tasks are so time-intensive and complicated that they must at least be partially taken over by a tax consultant, which in turn leads to costs. Furthermore, inventories of goods and raw materials must be carried out on an ongoing basis. This also costs time and money. Whoever is not obliged to make a balance should therefore avoid doing so voluntarily. Because there is a simpler way for these people to determine the profit or loss for the tax return.
Profit assessment through cash-basis accounting
The second possibility of winning is the making of a so-called cash-basis accounting. This is calculated according to the inflow and outflow principle. Only the money deposits and exits of a company are compared with one another to determine the profit, which you then enter into the tax declaration. However, this kind of calculation is just reserved for certain self-employed persons. For example, all freelancers, regardless of your profit and turnover, can create a cash-basis account. In addition, all traders and other self-employed persons whose profit per year does not exceed EUR 50,000 and which also have a turnover of no more than EUR 500,000 per year. The creation of an EÜR is quite simple and can also be easily realized by a layman. However, you should still be aware of all tax possibilities and be best advised by a tax advisor. Fast, inexpensive and proven quality you can find the right contact here.
Over depreciation to reduce the taxable profit
Depreciation is a popular and above all legal method to reduce the taxable income and hence the tax burden resulting from the tax return if you are self-employed. The full name is actually:“ Abschreibung für Abnutzung” (AfA). This is the amount that your company's assets lose in value during the course of a financial year through use and wear. In the tax declaration, such amounts are counted as operating expenses and thereby reduce profits. If you can already see at the beginning of a year that the profit will be very high at the end, it is worthwhile to acquire new assets to be able to depreciate them.
How are value assets being depreciated?
As beautiful as it may be, you cannot deduct the entire cost of the purchase directly from the first year. Instead, they must distribute these costs over their entire useful life and write them off over several years. Again, there are several methods. First the linear depreciation, where you distribute the costs in equal parts over the planned period of use and write down the same amount in each tax declaration. This means you always have an eye on how much your depreciation is and can control your profit development accordingly. Then there is the degressive depreciation. With this method, you start with a high percentage of the acquisition costs in the year of purchase, which continues to decrease during the entire useful life. This method is particularly worthwhile if you expect very high profits in a year and you want to reduce these as far as possible by depreciation. Which method of depreciation is most worthwhile for you, can explain to you by a tax consultant.
Special cases of depreciation in the tax declaration
There are assets that you can write off completely in the year of purchase, even if you buy them until the end of December. These are the so-called low-value assets. However, their value without VAT may not exceed EUR 410 per individual asset. Nevertheless, these low-value assets (GWG) are still well suited to significantly reduce the profit that will result from your tax return towards the end of the year. Note, that despite the immediate depreciation, you must include all GWGs, whose purchase value exceeds 150 euros without VAT, into a running directory.