The best tax tips for artists - great savings potential for operating expenses and public funds

Artists often face unique tax challenges. The complex nature of your sources of income, from sales to schedules to scholarships, requires careful planning and administration.

In view of current news about tax reforms and new funding offers , it is becoming increasingly important for artists to deal in detail with the possibilities of tax optimization. In particular, there are lucrative opportunities in the income tax deduction, with certain tax exemptions or tax reductions.

This article gives you a comprehensive overview of the best tax tips so that you can reduce your operating expenses, claim the best as possible and use public funds efficiently.

Note: Please note that this article does not represent tax advice or even replaces, but is only an editorially researched article on the subject.

Art as a high, worthy of funding

The state takes into account the high ideal value of artistic work. Art is an essential part of our cultural heritage and our common identity. For this reason, art promotion is understood and implemented as an important state task Tax law also promotes artistic work with special regulations, tax exemptions and tax reductions in income and sales tax.

Basic classification of artistic work

justified by an artistic activity and whether the so -called profit intention available.

Income tax liability

All persons who have their place of residence in Germany are basically subject to unlimited income tax liability, provided that they achieve income in the sense of a types of income . The main types of income play a role for artists:

• Income from commercial operations
• Income from self -employed, especially freelance work
• Income from non -self -employed work

Intent to make a profit

The seven types of income are based on the striving for profits or surpluses. Without this intention, an activity in technical jargon is considered a "hobby" and is not taken into account for tax purposes. The tax office checks the intention to make profit from external characteristics, although this is often difficult, especially in the artistic field.

Reasonable arguments for the intention must be presented. The tax office assumes an intention to make a profit if a positive total amount is expected in the long term. Preliminary decisions can be made in the event of uncertainties. In the event of clarification, the tax office adjusts the notices accordingly.

The Federal Finance Court and its tax office generally recognize the entrepreneurial activity as long as an operating -specific start -up time of at least five years has not yet been completed, even if it has only generated losses from the start. This also applies to the activity of an artist, since positive income is often only recognizable after a longer start -up time.

The intention to generate income is assessed using external characteristics, whereby certain circumstances can provide evidence that can be refuted. In terms of artistic activities, various points of view must be taken into account, such as the type of vocational training, artistic activity as a main source of buying and the professional marketing of the works.

It is crucial that the irregular participation in exhibitions alone is not sufficient to speak of professional marketing the works.

(See BFH judgments: FG Munich, judgment of 9.10.2009-7 K 1731/0; BFH, judgments of 6.3.2003-XI R 46/01; 23.5.1985-IR 101/81; 23.5.2007-XR 33/04)

In your specific case, it is best to speak to a tax advisor because flat -rate statements cannot be made at this point. Numerous different aspects are used in the overall assessment.

Which type of income?

Artistic activities can generate various types of income, including income from non -self -employed work , freelance activity or business .

It can happen that an artist combines several types of incomes in a assessment period, depending on the various activities that he performs. The correct assignment of these activities to the corresponding types of income is crucial because this has direct tax effects, especially for artists.

The distinction between independent commercial or freelance activity and non -self -employed activity is of great importance. While the tax office will be taxed at the end of the calendar year in the event of freelance or commercial activities and may be required for advance payments, it is common for non -self -employed work to deduct wage tax from the artist's salary and pay the tax office.

Independent or commercial activities can also sales tax liability , while employment and sales tax generally do not collapse.

Employees are people who are subject to an employer in the context of their work or are incorporated into the organizational structure of a company and must follow their instructions.

People who provide deliveries and services within the scope of their independent commercial or professional activity are not considered employees. The delimitation between self -employed and dependent work depends less on the formal contractual design, but rather on the concrete implementation of the agreement made .

In order to facilitate the tax classification of artists and similar professions, the financial administration has issued corresponding regulations, which it also sees in the online edition "Tax tips for artists" of the Bavarian State Government .

Tax tips for artists in employment (employee)

#1 Submit income tax return and use lump sums

The wage tax calculation is based on the share of annual wage tax, which is no longer necessary for the current wage payment period (usually monthly, with shorter employment even weekly or daily). The current wages are converted to an annual amount, assuming that the employee receives a salary throughout the year.

Even with single people without children, an annual declaration is worthwhile because of the lump sums. Good tax software such as tax bot or WISO does the income tax return quickly, without deeper specialist knowledge and relatively comfortable. The cost IHV 40-46 euros is always a good investment and will save you a lot of time and nerves.

Because the tax deduction in the declaration takes into account various tax benefits such as the basic allowance , the employee lump sum for advertising costs , the pension flat rate for insurance contributions or the special expenditure lump sum. As a result, the annual tax deduction is reduced even without output receipts. If your amounts actually incurred exceed the lump sums, the submission of the actual expenses is recommended. To do this, you must be able to show the spending documents.

It is more urgent again if it has not been worked in employment all year. Here comes tip #2.

#2 use special regulations for the income tax deduction for artists

Artists often change their employer and/or often have longer breaks between the employment. However, the wage tax is calculated, assuming that the income from various jobs could be achieved evenly throughout the year. As a result, the tax rate increases the few days for the payments.

In order to relieve artists during the year , special regulations were introduced to ensure that times without employment can be submitted. In the past, the relevant data of the employment times were noted on the income tax card, but today the transmission is made electronically.

Employees should submit the previous employer's income tax certificate to their new employer in order to benefit from the relief.

How does this tax relief work specifically?

During the extended wage payment period, the period before actual employment for income tax deduction is extended. The prerequisite for this is that this period has not already been used in an earlier employment relationship and the employer is informed about it. Up to a week, but a maximum of one month can be applied per two days of work.

The period for the payment of wages can also be extended to one month to the rear ( extended wage payment period ). In doing so, employers and employees agree that the entire month is considered a period of income tax deductions and the payments are initially treated as discount payments.

Freelance activity or business?

If you do not have an employee relationship, you may be self -employed. A delimitation of freelance activity and commercial operations is necessary here. In addition to an employee relationship, you can also achieve income from self -employment.

Freelance activities include independent scientific, artistic, writer, teachers or educational activities as well as professions such as doctors, lawyers, tax consultants, architects and journalists.

An artistic work is characterized by originality and a certain artistic quality, whereby the individual overall activity is a decisive factor. The recognition as an artist can be influenced by the training of the taxpayer (e.g. a completed art studies), press publications, art exhibitions and memberships in professional associations - although mere membership alone is not sufficient.

expert commission can be consulted to clarify the artistry, with such commissions being set up for different art areas in all federal states.

A self -employed activity can also be available if qualified specialists are hired. However, the prerequisite is that the self -employed person has sufficient specialist knowledge, is a managerial and performs the typical tasks independently.

Due to the strongly personal nature of artistic activities, this can only be recognized if the artist has a decisive influence on all activities required for the production of a work of art.

If the prerequisites for a freelance activity are not met, for example because the activity performed cannot be classified as "artistic" , there are usually income from commercial operation .

Tax tips for self -employed artists

#1 Set the operating expenses

operating expenses are often underestimated for tax savings . Many artists do not even know how many of their everyday expenses can be tax deductible. Operating expenses are all expenses caused by the entrepreneurial activity.

No operating expenses or advertising costs are expenses that affect the private lifestyle of the taxpayer.

The following items can be deducted from tax:

Material costs and studio editions

Let's start with the most obvious posts: material costs and studio editions. Colors, canvases, brushes, instruments, costumes and many other materials that you need for your works of art can be made as operating expenses.

It is the same with the rental costs for your studio or rehearsal room. Remember to calculate additional costs such as electricity and water.

Acquisitions / work equipment

If the acquisition costs are not higher than 410 euros without sales tax, the expenses can be deducted completely in the year of purchase. If the costs exceed this amount, there is a proportionate depreciation of the estimated useful life.

#2 Make travel expenses - mobility as a tax advantage

Art lives from inspiration and often it seems to be nourished by travel. Whether visiting exhibitions, participating in symposia or doing study trips - all of this can be asserted for tax purposes.

Travel costs

Travel expenses include both the costs for trips as well as overnight stays and catering. For trips with your own car you can start mileage (30 cents per kilometer). Evidence of public transport should be kept carefully.

Additional catering expenditure

When traveling several days, you can also claim additional catering effort. In Germany, this is 14 euros for every full day of travel and 28 euros for overnight stays.

Tax tips for all artists

#1 discontinue advertising costs

If a taxpayer cannot prove higher advertising costs, the employee lump sum of EUR 1,000 per calendar year will automatically be deducted from his income from non-self-employed work. This flat rate also applies to the entire year if the income has only been achieved for part of the year to ensure that no losses arise.

If an artist has higher advertising costs that exceed the employee lump sum, he must-like any other employee-provide these costs in detail in his income tax assessment.

be claimed by all artists as advertising costs

Workwear

Costs for typical work clothes can be claimed for tax purposes. Typical work clothes are clothing, which are, for example, as occupational safety clothing, for example, specially adapted to the respective work or objectively perform a professional function.

However, expenses for normal everyday clothing, even if it is mainly worn at work, are among the non -deductible costs for private lifestyle.

Application costs

It is possible to deduct expenses for job searches as advertising costs, unless they are reimbursed. This includes, for example, telephone costs, postage, copy costs for certificates and travel expenses for interviews. The success of the application does not matter.

Journeys between place of residence and workplace

When it comes to the routes between the place of residence and the first workplace in accordance with Section 9 (4) EStG (formerly: regular workplace), the costs are usually compensated for with the statutory distance flat rate.

On the other hand, trips to the workplace, which is not the first workplace, are usually taken into account with the actual costs.

Own study - the creative retreat

If you do not have a separate studio, you can still deduct a home office from the tax, provided that it is only used for professional purposes.

These include proportional rental costs, heating costs and other operating costs.

Away work and double housekeeping

a business trip if an employee is temporarily active outside of his apartment and not at his usual workplace. Even if the employee does not have a permanent workplace and usually works in different locations, this is considered a business trip.

This regulation is used, for example, for guest performances by theaters, ensembles or tours.

The costs for trips, overnight stays and meals incurred can be claimed as advertising costs unless they are reimbursed tax -free by the employer.

Special tax breaks for artists

#1 Operating expenditure flat rate in the case of freelancer

In the case of certain secondary activities, special regulations apply to operating expenses: Income from scientific, artistic or literary activity, including lectures or part-time teaching and testing activities, can be deducted in a flat rate of 25 percent of the operating income, but a maximum of 614 euros per year, without individual certificate.

This regulation does not apply to activities in accordance with § 3 No. 26 EStG. The maximum amount of 614 euros can only be used once a year for all activities.

If higher operating expenses have actually arisen and can be proven, the flat paint is no longer necessary. In this case, the operating expenses actually incurred are taken into account.

#2 Tax -free public funds

Grants from public funds or from a public foundation that are granted as support for the direct promotion of education or training, science or art are freed from taxes.

The condition for tax exemption is that the recipient is not obliged to perform a certain scientific or artistic achievement in return for the benefits or to do a certain work.

#3 Exercise allowance

Income from part -time activities as a trainer, instructor, educator, supervisor or comparable artistic activities are tax -free up to an amount of a total of 2,400 euros per year in accordance with Section 3 No. 26 EStG (= so -called trainer allowance).

These activities must be exercised on behalf of a legal entity under public law, which is based in an EU member state or a state of the European Economic Area under Section 5 (1) No. 9 KStG, for promoting non-profit, charitable or church purposes (§§ 52 to 54 AO).

The tax exemption applies, for example, to part -time choir directors, orchestral conductors or church musicians.

#4 Ehrensold

The remuneration for artists and financial support from German artists' aid are tax -exempt in accordance with § 3 No. 43 EStG, provided that these are payments from public funds that are made due to the artist's financial emergency.

#5 scholarships

Scholarships that are awarded by public funds or intergovernmental and supranational organizations to promote artistic training or further training and in which the Federal Republic of Germany is involved as a member are tax -exempt.

Likewise, under certain conditions, scholarships can be tax -free that are assigned by a facility that is founded or managed by a corporation under public law, or by a corporation, association of persons or assets in accordance with Section 5 (1) No. 9 KStG.

In order to be tax -free, the scholarships must not exceed an amount that is required for a living and training needs and is assigned in accordance with the guidelines of the donor. In addition, the recipient must not be obliged to make a certain artistic consideration or work in connection with the scholarship.

#6 prize money

Money premiums for artistic services must be taxed if they are closely linked to an income source in accordance with the Income Tax Act. The competitive conditions and the goals of the award ceremony must be taken into account.

#7 artist social fund

According to § 3 No. 57 EStG, the amounts that the artist's social security fund pays for in favor of the articles of social security or the insured person pays in favor of the articles insured under the artist social insurance law from the advent of artist social security and federal grant to a provider of social security.

#8 Small business regulation-Use of VAT flat rate

The regular taxation of income can often be complicated for artists. The possibility of lump sum according to § 19 UStG can offer a considerable relief here.

When using the small business regulation, you can refrain from designating sales tax if your sales in the previous year are less than 22,000 euros and is expected to be less than 50,000 euros in the current year. This can significantly reduce the administrative effort and is often particularly attractive for sideline artists.

#9 VAT exemptions of certain cultural institutions

The ideas of theaters, orchestras, chamber music ensembles and choirs are usually freed from sales tax if the federal government, the federal states, the municipalities or the municipal associations are. This tax exemption also applies to similar institutions of other entrepreneurs if the responsible state authority - in Bavaria the government of Lower Bavaria - certifies that they perform the same cultural tasks such as public institutions.

Information on the application process can be found in the Bayern portal . Services of independent soloists can also fall under this tax exemption. The music genre does not matter. Even music groups from the field of entertainment music can therefore benefit from a tax exemption.

The performance of plays and concerts by other entrepreneurs is tax -free if they are carried out by tax -fighting theaters, orchestras, chamber music ensembles or choirs. An event requires an appearance in its own name in front of the audience. Mediation services are not under tax exemption.

The tax exemptions exclude the input tax deduction.

Outlook on current developments

Recently there have been politically and economically significant developments that could also have specific tax effects on artists. For example, there are currently negotiating further tax relief for those industries that were particularly affected by the economic effects of pandemic, including the cultural and creative industries. German Cultural Council is also committed to this .

It is worth pursuing the news situation and, if necessary, contacting your tax advisor in order to benefit from new regulations in good time.

Ending

In summary, it can be said that there are many interesting ways to use tax advantages as an artist and thus strengthen the financial basis for her creative work. The skillful use of operating expenses, travel expenses and public funding can bring significant savings.

In addition, it is important to find out about special tax regulations for artists and to use them in a targeted manner. Innovative online tools also remedy the situation quickly and easily.

Always stay up to date with current developments and funding programs and do not hesitate to take advantage of professional advice. Her art deserves that she can develop - with the right tax tips, nothing stands in the way of this goal.

If you have any further questions or want to share your own experiences, I cordially invite you to leave a comment. It is always valuable to learn from each other and to support each other.

Joachim Rodriguez y Romero

Owner and managing director of Kunstplaza. Publicist, editor and passionate blogger in the field of art, design and creativity since 2011. Successful conclusion in web design as part of a university degree (2008). Further development of creativity techniques through courses in free drawing, expression painting and theatre/acting. Profound knowledge of the art market through many years of journalistic research and numerous collaborations with actors/institutions from art and culture.

www.kunstplaza.de/