Are you self-employed and considering using flat-rate professional expenses instead of actual expenses for your self-employed activities?
Then this guide is perfect for you! In this article, we discuss the pros and cons of working with flat-rate expenses as a self-employed person, so you can make an informed decision.
The difference between actual professional expenses and flat-rate professional expenses ⚖️
First, it is important to understand the difference between actual professional expenses and flat-rate professional expenses. Actual professional expenses are the actual costs you have incurred for your activities. You will prove these based on receipts, invoices and other supporting documents.
So what are flat professional expenses? That is a fixed amount of expenses set by the tax authorities that you can bring in without further justification. Of course, the maximum amounts of flat professional expenses are not high, in most situations it will be better to bring in the actual professional expenses.
Tip:
Want more information on lump sum expenses and associated figure examples? Then click here!
✅ Benefits from flat-rate professional expenses
Save time
One of the advantages of flat-rate professional expenses is that it saves time. Instead of having to keep and account for every receipt and invoice, you can use a fixed amount set by the tax authorities. So it reduces your administrative burden and this gives you more time and space to focus on your self-employed activities.
Predictability from a lump sum
In addition, flat-rate professional expenses also offer you a certain degree of predictability. You know exactly how much you can deduct and have no surprises when filing your tax return. This can help you plan your finances better and give you peace of mind.
❌ Disadvantages of flat-rate professional expenses
Potentially lower deduction of expenses
While flat-rate professional expenses offer some advantages, there are also some disadvantages to consider. The biggest disadvantage is that the lump sum amount may be lower than the actual professional expenses.
Lack of individuality
Another disadvantage of a flat-rate amount is that it limits you from deducting specific expenses. If you have certain business expenses that do not fall within the lump sum amount, you cannot deduct them. Because you have to choose either the flat-rate expense deduction or the actual business expenses. Combinations from both systems are (usually) not possible).
This can be especially problematic if you have specifically professional expenses that are not covered by the flat-rate amount.
Tip:
Not sure which specific professional expenses are deductible? Then be sure to view this list of deductible professional expenses for your accounts
Conclusion
When evaluating the pros and cons of a lump sum, it is important to consider your own situation and needs. If your time is limited and your actual professional expenses are relatively low, using flat-rate professional expenses may be a good option.
On the other hand, if you incur a lot of expenses and you expect your actual professional expenses to be higher than the flat-rate amount, accounting for actual professional expenses may be more advantageous.
It is important to always keep a clear summary of your actual expenses so that you can compare whether the flat-rate amount is advantageous or not. With Dexxter’ s accounting tool, you can very easily register all your professional costs, so you always have a good summary of your accounts!
