Business expenses in Germany 2026: what freelancers and companies can deduct

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You run a freelance business or a small GmbH from Germany and want to deduct everything you legally can. This guide covers what counts as a business expense in 2026, the caps and flat rates, how your legal structure changes the picture, and the records the Finanzamt expects.

Germany business expenses in 2026: the key figures

Is this guide for you?

Read on if you…

• are a freelancer, sole trader or GmbH owner-manager taxed in Germany in 2026
• work from home, travel for clients or use a car and want to know what you can claim
• are deciding between staying self-employed and forming a company, partly for deduction reasons

Probably not your case if you…

• are an employee claiming work costs, covered in personal tax deductions and benefits in Germany
• run a company managed from outside Germany with no German presence

What counts as a business expense in Germany?

The definition in §4(4) of the Income Tax Act (EStG) is short: expenses caused by the business. There is no closed list. Software, hosting, coworking, contractors, professional insurance, bank fees, your tax adviser, job-related training: all deductible in full. The Finanzamt tests three things:

1. Business cause. Would you have spent this without the business? If clearly not, it is deductible.
2. Mixed use. Costs serving both private and business life (phone, laptop, car) are split by a documented share. A private item with "a bit of business use" is not deductible.
3. Proof. A proper invoice with your name, date, net amount and VAT. Under EUR 250 gross a simplified receipt is enough.

The flip side is §4(5) EStG, a list of business-caused expenses that are capped or excluded anyway. That is where the limits below come from.

Which expenses have caps or special rules in 2026?

Equipment and depreciation

• Up to EUR 800 net: write off in the year of purchase (low-value asset, GWG).
• Computers, laptops, peripherals and software: written off in one year at any price, since the tax authorities accept a one-year useful life.
• Everything else: depreciated over its official useful life (desk 13 years, car 6 years).
• Investment boost: movable assets bought between 1 July 2025 and 31 December 2027 may use 30% declining-balance depreciation. A EUR 10,000 camera rig gives EUR 3,000 in year one instead of EUR 1,429.
• Planned purchases: businesses with profit up to EUR 200,000 can deduct 50% of a planned asset cost up to three years in advance (§7g EStG), plus 40% special depreciation when they buy.

Home office

If a dedicated room is the centre of your entire professional activity, true for most remote freelancers, you deduct that room's share of rent, utilities and insurance with no cap. Otherwise you claim EUR 6 per day worked mainly from home, up to EUR 1,260 a year.

Travel, meals and hospitality

• Travel in Germany: per diems of EUR 14 for absences over 8 hours and EUR 28 for full days away; actual hotel costs; EUR 0.30 per kilometre in your own car or actual costs.
• Business meals: 70% deductible, 100% of the VAT reclaimable, provided the receipt shows who attended and why.
• Gifts: up to EUR 50 net per recipient per year. One euro over and the whole gift is non-deductible.

Car

A car used over 50% for business is a business asset. All costs are deductible, but private use is added back at 1% of the gross list price per month, or 0.25% for an electric car listed up to EUR 100,000. Alternatively keep a full logbook (Fahrtenbuch). Electric cars bought between July 2025 and end-2027 may be depreciated 75% in year one.

Never deductible

Your own income tax, solidarity surcharge and church tax. Trade tax, since 2008. Fines. Private living costs, even if you "network" at dinner. Corporate tax for a GmbH.

How does your legal structure change what you can deduct?

The expense rules are the same for everyone. What differs is who the taxpayer is, whether your own pay is an expense, and the overall rate. The comparison is for a founder living in Germany.

In a company your salary, pension provision and company car are expenses of the company, which is how owner-managers smooth their tax. A sole trader's "salary" is just profit: you cannot pay yourself and deduct it.

Here is the warning. A company is tax resident where it is effectively managed. A UG registered in Berlin but run from Lisbon becomes Portuguese-resident for tax. Conversely, a foreign freelancer working from a German office may create a German permanent establishment. Where you sit when you decide matters more than where the register is. Compare the structures in detail in our guide to legal forms of business in Germany, and if you want the setup done properly see Heavnn business setup.

How do you record and claim business expenses?

1. Separate account. Not required for sole traders, but it halves bookkeeping time and audit friction.
2. Keep every invoice in its original form; e-invoices electronically and unaltered. Retention is 8 years for receipts and 10 years for books and annual statements.
3. Choose your profit method. Freiberufler and small traders use the cash-based Einnahmen-Überschuss-Rechnung (EÜR): an expense counts when paid. Larger traders and all companies keep double-entry books.
4. VAT. Reclaim input VAT in your advance returns. No valid invoice, no input VAT. Kleinunternehmer (EUR 25,000 last year, EUR 100,000 this year) deduct the gross amount instead.
5. File. The 2025 return with the Anlage EÜR is due 31 July 2026 (28 February 2027 with an adviser) via ELSTER. You must already be able to receive e-invoices; issuing them becomes mandatory in 2027 or 2028 depending on turnover.

VAT and trade tax mechanics are covered in specific taxes in Germany. Austria and Switzerland apply similar principles with different caps: see business expenses in Austria and business expenses in Switzerland.

Common mistakes (and what they cost)

• Deducting 100% of business meals. The Finanzamt cuts it to 70%, and disallows everything if the receipt lacks names and purpose. On EUR 3,000 of dinners that is EUR 900 or EUR 3,000 lost.
• Claiming a full home office that is not your work centre. You are cut back to EUR 1,260, with interest on the difference.
• Buying a car without a logbook or list price check. The 1% rule on a EUR 60,000 car adds EUR 7,200 a year to your taxable profit. A logbook or an electric car can halve that or better.
• Running your German GmbH from abroad. Effective management elsewhere can make the company resident there and trigger German exit taxation on its assets, a six-figure problem for a profitable firm.

Frequently asked questions

Can I deduct my home office as a freelancer in Germany?

Yes. If a separate room is the centre of your whole professional activity, deduct its proportional rent, utilities and insurance in full. Otherwise claim the flat rate of EUR 6 per day you work mainly from home, up to EUR 1,260 a year. Working from a kitchen table qualifies for the flat rate, not for the actual-cost method.

Are business meals tax deductible in Germany?

70% of the net cost of entertaining clients or partners is deductible, and the full VAT is reclaimable. The receipt must be machine-printed and completed with the names of everyone present and the business reason. Meals with staff at internal events are fully deductible. Eating alone while travelling is covered by per diems instead.

What is the low-value asset limit in Germany in 2026?

Assets costing up to EUR 800 net (EUR 952 gross) can be written off immediately. Alternatively, items between EUR 250 and EUR 1,000 net can be pooled and written off over five years. Computers and software have an accepted one-year useful life and can be expensed in full regardless of price.

Is trade tax deductible as a business expense?

No. Since 2008 trade tax is not a deductible expense for either sole traders or companies. Sole traders and partnerships instead receive a credit of 4 times the trade tax base amount against their income tax, which neutralises trade tax up to a municipal multiplier of about 400%. Companies get no credit.

How long do I need to keep receipts in Germany?

Accounting documents such as invoices and receipts must be kept for 8 years, books, inventories and annual accounts for 10 years. Electronic invoices must be stored electronically in their original format. The period starts at the end of the calendar year of the last entry, so 2026 receipts must be kept until the end of 2034.

Can a GmbH deduct the owner's salary?

Yes. A managing director's salary, pension commitments and company car are deductible expenses of the GmbH, as long as they are at arm's length. A sole trader cannot deduct their own pay, because profit is their income. Excessive owner salaries are reclassified as hidden profit distributions, taxed like dividends.

Related guides

• Legal forms of business in Germany: freelancer, sole trader, UG or GmbH
• Specific taxes in Germany: VAT, trade tax, church tax
• Personal tax deductions and benefits in Germany
• Germany's tax system in one page
• How to become a German tax resident
• Business expenses in Austria
• Business expenses in Switzerland
• All country tax guides

Sources

• Einkommensteuergesetz (EStG), §§4, 6, 7, 7g – Gesetze im Internet
• Umsatzsteuergesetz (UStG), §§14, 15, 19 – Gesetze im Internet
• Abgabenordnung (AO), §147 retention periods – Gesetze im Internet
• Bundesministerium der Finanzen – per diem rates and depreciation tables
• Existenzgründungsportal des BMWK – official start-up portal
• PwC Worldwide Tax Summaries – Germany, corporate deductions (secondary cross-check)

This guide is general information, not personalised tax advice. See how we research and review.