How does the trade tax affect my income tax?
August 14, 2023 | 40,00 EUR | answered by Isabel Möller
Dear Sir or Madam,
I am Jessica Ahlert and I run a small photography business. Over the past few years, I have successfully expanded my business and have also generated profits accordingly. Now I am facing the question of how the trade tax affects my income tax.
Currently, I pay trade tax on my profits and have already submitted my income tax return. However, I am concerned that the trade tax could increase my personal tax burden and therefore increase my income tax.
I have heard that trade tax can be claimed as a business expense in the income tax. Is that true and how exactly does trade tax affect my income tax? Are there ways to minimize or optimize the tax burden?
I would be very grateful if you could help me with this matter and provide me with possible solutions. It is important to me to handle my tax affairs correctly and not make unnecessary tax payments.
Thank you in advance for your support.
Best regards,
Jessica Ahlert
Dear Ms. Ahlert,
Thank you for your inquiry regarding the impact of trade tax on your income tax. As a tax advisor specializing in trade tax, I am happy to assist you and provide possible solutions.
First of all, it is important to understand that trade tax is an independent tax levied on the profits of business owners. This tax is set by municipalities and is usually a certain percentage of the trade income. Trade tax is therefore separate from income tax, which is levied on your taxable income.
However, trade tax can be claimed as a business expense in your income tax. This means that you can deduct the trade tax paid from your profit before income tax is calculated. This reduces your taxable income and therefore your personal tax burden.
It is important to note that you can only claim trade tax in your income tax return if you are self-employed or part of a partnership. In the case of a corporation such as a GmbH, trade tax is already taken into account in corporate tax.
To minimize or optimize your tax burden, I recommend exploring all options for tax optimization. This includes choosing the right method of profit determination (e.g. cash basis accounting or accrual accounting), utilizing tax depreciation possibilities or investment deduction allowances, and optimizing business expenses.
It may also be beneficial to seek individual advice from a tax advisor to properly manage your tax affairs and avoid unnecessary tax payments. A professional tax advisor can help you minimize your tax burden and make the most of tax benefits.
I hope this information has been helpful to you. If you have any further questions or require individual advice, please feel free to contact me.
Best regards,
Isabel Möller
