Saving tax when self-employed: legitimate options, not tax tricks

Michael Pauker · 2026-10-14

Your tax assessment arrives in March, with your new payments on account in the same envelope, and both figures are higher than expected. When you are self-employed or a freelance professional, your tax is not simply deducted through payroll. You transfer it yourself, quarterly, and feel every euro.

Unsurprisingly, there is no shortage of “tax tricks” on offer. Most lists mix up three things: measures that genuinely save tax, measures that merely defer tax to later years, and measures that save tax but tie up your money for decades. This distinction is crucial to your decision.

We sort nine legitimate options into these three groups, work through an example for a freelance professional using the 2026 tax rates, and show honestly what a rental flat costs before tax.

01Saving, deferring, tying up capital: the three types of tax benefit

Before using any of these options, it is worth asking: what happens to the money, and what happens in five years?

Deferral is not a bad thing. If you pay 42% today and the deferred tax falls due in a weaker year, you may save overall. But if you earn even more next year, you pay back the benefit with interest and compound interest. And tying up capital is only worthwhile if you intended to invest that money for that purpose anyway.

02Nine legitimate options with their legal basis

Two options need explaining. The investment deduction allowance lets you deduct half the cost of a planned purchase as an expense up to three years in advance. When you buy the asset, the amount is added back to your profit and reduces the depreciation available. If you do not buy it, the deduction is retrospectively reversed and interest is charged on the additional tax due.

The basic pension is more attractive to self-employed people than to employees. For employees, pension insurance contributions count towards the maximum allowance. Those who are not members of the statutory pension scheme can use almost the entire €30,826 allowance. In return, the money is tied up until retirement, cannot be inherited except by spouses and children under survivors' cover, and is later 100% taxable if you retire in 2058 or thereafter.

03Worked example: Laura, a freelance architect

Laura is single, works as a freelance professional and has taxable income of €90,000 after deducting her insurance contributions. She uses three options: €10,000 into a basic pension, a €10,000 investment deduction allowance for a plotter and new computers that she plans to buy for €20,000 in 2027, and the purchase of a rental flat. The name is fictional, and the figures are an illustrative calculation, not a forecast.

€11,331 less tax sounds like a lot. Let us look more closely at how much of that Laura keeps.

The basic pension saves €4,700 but costs Laura €10,000 in liquidity, which she only gets back in retirement as a taxable pension. The investment deduction allowance saves tax in 2026 that becomes payable again in 2027 and subsequent years through reduced depreciation. And the flat? That brings us to the question clients ask us in many consultations.

04How much do I have to contribute out of my own pocket each month?

Laura's flat costs €250,000 plus €25,000 in purchase costs. She finances the whole amount at 3.7% interest and a 2% principal repayment rate. The rent is €800 per month, and costs that cannot be passed on to the tenant are €600 per year.

Before tax, Laura contributes around €556 per month; after tax, around €375. Of this, €5,500 per year goes towards building her own wealth through principal repayments, because her outstanding debt falls. By contrast, the €4,125 depreciation costs her nothing; it simply reduces her tax. This is why the flat shows a loss for tax purposes while the bank account tells a different story.

Buying a flat purely as a tax-saving scheme is therefore the wrong approach. It is worthwhile if you want to build wealth over the long term anyway, can afford the monthly cash contribution and choose the right location. The tax benefit then makes it easier, but it is no substitute for any of these conditions.

05Tax payments on account and your tax adviser

Payments on account are crucial to your cash flow during the year. The tax office sets them based on your latest tax assessment, payable quarterly on 10 March, 10 June, 10 September and 10 December (§ 37 EStG). If your profit falls or deductible costs rise, you can apply for a reduction.

There is a restriction for a newly purchased rental flat. Losses from it are only taken into account for payments on account from the calendar year following the purchase (§ 37 Abs. 3 Satz 8 EStG). In the first year, the tax benefit therefore only comes through the tax assessment. Plan to fund the entire cash contribution out of your own pocket until then.

06Risks and limitations

Deferred tax comes back. The investment deduction allowance, special depreciation and declining-balance depreciation reduce tax today and increase it later. There is only an advantage if your tax rate is lower later or you genuinely make use of the liquidity now.

Money tied up. A basic pension and a property tie up capital for the long term. You cannot borrow against a basic pension or cancel it. A property can be sold, but not at short notice and not always at the price you want. Gains from a sale within ten years are taxable.

Property risks. Vacancy, maintenance, unpaid rent and refinancing at higher interest rates can increase the cash contribution required. The tax benefit also falls if your profit falls.

Finance for the self-employed. Banks generally require annual accounts or income-and-expenditure statements and tax assessments for the last two to three years. A large investment deduction allowance reduces your reported profit, and that is precisely the figure the bank sees too. If you want to finance a property, you should factor this into your tax planning.

07Further reading

• Investment property for the self-employed: finance
• Saving tax for high earners
• Saving tax as an employee
• Offsetting rental losses
• Tax benefits of property as an investment
• Calculator: tax savings
• Glossary: loss carryforward
• Glossary: trade tax on property

08Sources

All sources accessed on 14 October 2026.

• § 4 EStG (Abs. 4, Abs. 5 Nr. 6b und 6c), § 6 EStG (Abs. 2), § 7 EStG, § 7g EStG, § 10 EStG, § 21 EStG, § 32a EStG, § 35 EStG, § 37 EStG
• § 19 UStG (small businesses)
• Act introducing an immediate tax-based investment programme, promulgated on 18 July 2025 (30% declining-balance depreciation), overview from the IHK Rhein-Neckar
• Maximum deductible retirement provision contributions for 2026, lohn-info.de
• §§ 3, 4 Solidaritätszuschlaggesetz 1995
• Worked examples: our own calculations using the 2026 tax rates, as at 14 October 2026

Note: This guide provides general information and does not replace individual tax advice. All figures are illustrative calculations with disclosed assumptions, as at 14 October 2026.