Which tax bracket is the best for me as a self-employed individual?
October 14, 2023 | 40,00 EUR | answered by Yvonne Schreiber
Dear tax advisor,
My name is Friedhelm Witzelmann and I am self-employed as a business consultant. I have been dealing with the topic of tax classes for some time now and I am wondering which tax class is best suited for me as a self-employed individual.
Currently, I am classified in tax class III, as my wife is currently not employed. However, I am questioning whether this tax class is really the best choice for me. I am concerned that I might be paying too much taxes or that there may be a better alternative that could offer me tax advantages.
I have heard that self-employed individuals are often classified in tax class IV with factor in order to optimize their tax burden. However, I am unsure whether this would be the right decision for me as a business consultant.
Could you please explain to me which tax class is best suited for me as a self-employed individual? What are the advantages and disadvantages of the different tax classes for self-employed individuals? Are there any alternatives that could offer me tax benefits?
I look forward to your expertise and thank you in advance for your support.
Best regards,
Friedhelm Witzelmann
Dear Mr. Witzelmann,
Thank you for your question regarding tax classes for self-employed individuals. As a tax advisor, I know that choosing the right tax class for self-employed individuals is an important decision to optimize your tax burden and take advantage of tax benefits.
First and foremost, it is important to know that self-employed individuals generally cannot be classified in tax class III, as this tax class is specifically intended for married couples with significantly different incomes. As a self-employed individual, you have the option to choose between tax classes IV and IV with factor.
Tax class IV is the standard tax class for self-employed individuals, which means that your taxes will be calculated according to the progressive income tax rate. You will pay your taxes according to your income without any specific factor taken into consideration.
On the other hand, tax class IV with factor allows for your tax deduction to be made during the year based on an estimate of your expected annual profit. This may result in you having to pay less taxes in advance and thus maintaining liquidity. However, there may also be a repayment due at the end of the year if the estimate does not match the actual profit.
It is important to note that the choice of tax class also depends on other factors, such as your personal income, tax deductions, and financial situation. In some cases, it may also be beneficial to switch tax classes to take advantage of tax benefits.
Overall, tax class IV with factor is often a good choice for self-employed individuals to optimize their tax burden and maintain liquidity. However, I recommend that you consult with a trusted tax advisor to analyze your individual situation and determine the best tax class for you.
I hope this information is helpful and I am available to answer any further questions you may have.
Best regards,
Yvonne Schreiber
