Operating expenses – what you can deduct before you start your own business

When you set up a new business, there are usually upfront costs. Under certain conditions, you can deduct these as so-called anticipated business expenses.

What are anticipated operating expenses?

The business expenses involved in starting your business can be very different from those of any other entrepreneur. After all, it always depends on the company and the business idea. However, this always means expenses that are directly related to the founding of the company. This can, for example, be information material in the form of specialist literature or further training. Travel costs and consulting costs are also included in the anticipated operating expenses. These may be deducted in the current year, even if the start-up has not yet taken place. In the following article, we explain how you record the expenses in your tax return, what else you should consider when starting a business and how operating expenses can be deducted after the company has been set up. Please note, however, that this is not tax advice. Your tax advisor is the right contact person for detailed questions.

Gather evidence from the start

So that the tax office can understand your anticipated business expenses, you should collect the receipts meticulously from the start. It is best to put all the items in a table and write a reason for each of them as to why it is important for becoming self-employed. For example, state why you want to deduct a train ticket to Munich as a business expense by writing down why you went where. If you have made the journey to take part in a start-up seminar, it is an advantage if the appropriate invoice is also available.

This is how the tax return works

In the course of your tax return, you must enter the total of the expenses in the EÜR annex. This serves to determine the profits of companies that are not subject to double-entry bookkeeping. Normally, income and expenses are entered there and the profit is determined as a result. Since you haven’t entered anything yet, you’ll get a negative number. You now enter this in Appendix S under income from self-employment or in Appendix G under commercial income. This reduces your taxable income in the year in which the business expense was made. It is irrelevant whether you were still employed at the time.

Keep receipts handy

The tax office either accepts your anticipated operating expenses (external link) immediately or asks for the receipts with the associated justification. If you have prepared well, you can present both immediately and thus make a good impression on the officials. It is best to have a tax advisor explain this to you. He can explain all the details to you. The bill that he sends you later is also one of the anticipated business expenses and can therefore also be deducted.

Financial plan as part of the business plan

But as a start-up, there is more to consider. Not only the anticipated operating costs, but also the regular expenses that arise after the foundation of the company play an important role, as well as many other factors. In order for financing to be possible through a bank, a business plan should be drawn up. This includes the business idea, the company’s goals and of course the financial plan (external link). The latter is a particularly important part of the business plan. Because without a functioning financial plan, the company cannot make a profit and has therefore missed its purpose of existence. As theoretical and dry as the creation of a financial plan is, it is absolutely important when starting a company and should of course always take into account the operating expenses and start-up costs. Don’t forget the following points when preparing your financial plan:

After starting a business

Once the company has been founded, you can offset the operating expenses against your sales. However, there are certain rules that must be observed. If the purchase price exceeds a certain amount, this must be deducted in stages over a period of several years. There are the so-called depreciation tables for this. You can download this from the website of the Federal Ministry of Finance. They are organized by industry, so you should find the right one for your company faster. These tables can be used to determine the useful life. Because the authority assumes that a printer, for example, will be used for several years. In order to make bookkeeping easier for companies, there are so-called low-value assets (external link). These are mobile, wear-and-tear and independently usable acquisitions that have been purchased or manufactured at a net price of up to 800 euros. Such assets can be booked after receipt of the invoice and claimed as an operating expense. Typical low-value assets include pens, small items of furniture, wastepaper baskets, telephones and much more. Devices that cannot be used independently, such as printers or monitors, cannot be categorized as low-value assets.