Differences between business expenses
Tax law differentiates between business expenses based on the amount deductible and the timing of the deduction. Understanding these differences is crucial for preparing an accurate tax return and maximizing potential tax benefits.
Types of business expenses:
Preliminary business expenses
These are costs that arise before your actual business launch or the start of operations. Examples include consulting fees, market research, or necessary purchases. These costs can be deducted for tax purposes even before your business officially starts.Subsequent business expenses
These are expenses that occur after you have closed or ceased operations (e.g. legal fees, payments for remaining liabilities). These costs are also tax-deductible.Immediately deductible business expenses
These costs directly reduce your profit and tax liability in the year they arise. Typical examples include office supplies, travel expenses, or ongoing operating costs.Partially deductible business expenses
Some costs can only be partially deducted. A classic example is business meals: generally, only 70% of these costs are deductible.Non-deductible business expenses
These are expenses that are private in nature or legally non-deductible, such as fines, penalties, or excessive representation expenses.Limited deductible business expenses
These expenses can only be deducted up to a legally defined limit. Examples include gifts to business partners (up to €35 net per year per recipient) or a home office.
Proper classification of your expenses is crucial to avoid tax disadvantages and to fully benefit from potential tax savings. If you are unsure, we are happy to offer you individual advice.
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