Distinguish between personal and commercial loans
When it comes to whether loans are tax deductible, the first thing to clarify is whether a loan is private or commercial. The thing about personal loans is that they in almost no case may be required for tax purposes. Anyone who books a holiday in Mallorca, buys a gaming PC or buys a car exclusively for private use is not eligible for tax purposes. The state does not want to finance the private pleasure of citizens.
The situation is different if a loan is to be used commercially. This is the case, for example, when you need to finance a flight to Mallorca to attend a business meeting there or to acquire new customers. Also, some businessmen need a car to get their work done. If you buy a vehicle for business purposes, you can also claim it for tax purposes. In tax matters, a clear distinction must always be made regarding which type of loan is involved.
Only the interest on the loan is tax-relevant
Furthermore, when claiming a credit for tax purposes, a clear distinction must be made between repayment and interest. The refund is not considered a burden that companies can claim for tax purposes. You just have to return the money received from a bank or credit institution. There are therefore no additional costs that can be deducted from the refund.
Loan rates are different. These are an extra burden on companies because they have to pay back more money than they received. This means that they must first generate money which they can pay to the bank or lender in the form of interest. The loan rates they are therefore considered a financial burden, which companies can apply for tax purposes. interested learn from Younited Credit how you can deduct a loan from taxes.
Generate taxable income from a loan
If the loans are to be claimed for tax purposes, it should always be clarified whether they are intended to generate taxable income. If a car is bought just because so you can attend client appointments and get your work done, the purchase is linked to the clear objective of generating tax revenue. The same is true if a loan is to be used for the renovation or purchase of an apartment or entire property. So the goal is to generate taxable rental income so that the loan can also be deducted.
In essence, the State weighs loans: it reduces the investment costs that companies have to bear on their own because they hope to then generate taxable income. This in turn benefit the state, so that he ends up with more money in his pocket than if he hadn’t made it possible to withdraw from the loans. The ability to deduct loans from taxes is therefore not a form of government charity, but a kind of subsidy that should lead to higher tax revenues in the long run.
Typical examples of loans relevant for tax purposes
A typical example of a loan that may be required for tax purposes is a commercial real estate loan. A property is then purchased, for example, to set up production facilities there or rent them. In both cases, taxable income is generated, so real estate loans are often tax deductible. However, if the borrowers live on the property itself, complications can arise.
Also, auto loans can be tax deductible if the car is used commercially. Management fees are then considered advertising expenseswhich are tax deductible. In some cases, however, it happens that cars both privately and professionally be used. In this case, costs can only be requested pro rata. This is done via the 1% rule or by keeping a record.
Another typical example are the so-called educational loans. Here, funds are raised in order to invest them, for example, in further education. The idea here is that a well-trained workforce it is more productive and therefore generates more sales and profits. As a result, taxable income is generated which benefits the city.
Get professional advice
The tax system in Germany is complicated and difficult to understand. As a result, it can easily happen that errors are made in the tax return. This is especially true when many different posts must be taken into consideration and should be eliminated. However, because errors in tax returns can be costly, businesses should proceed with caution in this case.
It is usually advisable to work with a professional tax advisor. Knows things like special charges, taxable income and interest on eligible loans. Support companies in preparing their tax return Or do this job entirely yourself. Companies therefore know that their tax problems are in good hands and can concentrate entirely on their core competencies.
In the case of a loan contract, indicate the intended use
Businesses can take various measures to ease tax matters. For example, when taking out a mortgage, it is possible to indicate the intended use and expressly agree on it that it is a business loan. So it will be easier to take out the loan later and prove that you have the right to do it. Banks and lenders often offer appropriate advice, otherwise it may make sense to speak to a tax advisor before concluding the loan agreement.
Conclusion
In many cases it is possible for companies to apply for loans for tax purposes. This is especially interesting for founders and startups that need loans for urgent investments. It should be considered whether and to what extent a loan can be claimed for tax purposes carefully checked in advance want. When in doubt, it always makes sense to seek the professional help of a tax advisor. In this way, obstacles and errors can be avoided and companies benefit in various ways from debt.
