Hello everyone, can someone explain the pros and cons of considering photovoltaic systems as a hobby business?
We have had a system with 9.92 kWp since the middle of last year.
I have done some research and so far I see the following:
Advantage:
- No more quarterly reporting to the tax office.
Disadvantage:
- I cannot claim tax deductions for repairs. Since an inverter will probably fail after about 20 years, this is not ideal.
However, it might be possible to opt out of the hobby business classification for the tax year?
Is that really all the significant changes? What else should be considered, and what have you done or would you do?
We have had a system with 9.92 kWp since the middle of last year.
I have done some research and so far I see the following:
Advantage:
- No more quarterly reporting to the tax office.
Disadvantage:
- I cannot claim tax deductions for repairs. Since an inverter will probably fail after about 20 years, this is not ideal.
However, it might be possible to opt out of the hobby business classification for the tax year?
Is that really all the significant changes? What else should be considered, and what have you done or would you do?
N
nordanney5 Jul 2021 15:00Please check under finanzamt dot bayern dot de/Informationen/Steuerinfos/Weitere_Themen/Photovoltaikanlagen/Merkblatt_Liebhabereiwahlrecht%20.pdf
Everything you want to know is explained there.
Everything you want to know is explained there.
The topic of taxes can initially seem intimidating if you have no prior experience with it.
It is also not advisable to hire a tax consultant just for this purpose, unless they can handle it “for a small fee” as part of an existing agreement – a real profit killer!
On closer inspection, however, the subject is not that complicated, and there are plenty of tools available to help. Many tax software programs for private users even include a photovoltaic module and guide you through the process.
This is a typical misconception. You are probably referring to the VAT advance returns, provided you don’t opt for the small business regulation.
These must be submitted monthly for one year after "starting" the business. Honestly, this is no big deal if you use a supporting tool.
For the following year, you simply submit an informal request (unless the tax office notifies you proactively) to file annually only, due to the low VAT collected – and that’s it. Then you only submit the annual return.
Overall, I can only recommend not opting for the small business regulation just because you are ‘afraid’ of the tax topic. You would be forgoing the 19% VAT on the purchase of the entire system – so before doing that, it’s better to invest in a tax consultant, who will cost only a fraction in relation.
It is also not advisable to hire a tax consultant just for this purpose, unless they can handle it “for a small fee” as part of an existing agreement – a real profit killer!
On closer inspection, however, the subject is not that complicated, and there are plenty of tools available to help. Many tax software programs for private users even include a photovoltaic module and guide you through the process.
Tx-25 schrieb:
Advantage:
- No more quarterly reports to the tax office.
This is a typical misconception. You are probably referring to the VAT advance returns, provided you don’t opt for the small business regulation.
These must be submitted monthly for one year after "starting" the business. Honestly, this is no big deal if you use a supporting tool.
For the following year, you simply submit an informal request (unless the tax office notifies you proactively) to file annually only, due to the low VAT collected – and that’s it. Then you only submit the annual return.
Overall, I can only recommend not opting for the small business regulation just because you are ‘afraid’ of the tax topic. You would be forgoing the 19% VAT on the purchase of the entire system – so before doing that, it’s better to invest in a tax consultant, who will cost only a fraction in relation.
I currently have to submit the VAT return once a quarter. I use the Elster software to file it electronically. Since I can copy the data from the previous form, it only takes a couple of minutes. Therefore, the effort doesn’t discourage me. I just thought that the hobby status of the photovoltaic system might have additional benefits, beyond being able to avoid even this small effort. I also reclaimed the tax for purchasing the system at the time. I believe that worked out very well for me.
I
Isokrates5 Jul 2021 22:17It is basically very simple:
Buy a photovoltaic system, opt out of the small business regulation, claim input tax deduction (currently still possible for the photovoltaic battery, even though it is used purely for private purposes). After five years, apply the small business regulation.
I would never voluntarily classify it as a hobby for income tax purposes. You can effectively generate a loss here that reduces other income, since this loss is derived from business income and is therefore fully offsettable.
At the moment, photovoltaic systems in connection with hobby classification are increasingly coming under scrutiny by tax authorities. Previously, questions about self-consumption were rarely asked; nowadays, this only happens if you are lucky with the tax office officer.
Buy a photovoltaic system, opt out of the small business regulation, claim input tax deduction (currently still possible for the photovoltaic battery, even though it is used purely for private purposes). After five years, apply the small business regulation.
I would never voluntarily classify it as a hobby for income tax purposes. You can effectively generate a loss here that reduces other income, since this loss is derived from business income and is therefore fully offsettable.
At the moment, photovoltaic systems in connection with hobby classification are increasingly coming under scrutiny by tax authorities. Previously, questions about self-consumption were rarely asked; nowadays, this only happens if you are lucky with the tax office officer.
Hobby activities can also have advantages.
Labor costs can be deducted as contractor services on your taxes.
At the same time, you can still use the tax allowance for other income.
In some cases, you might not even need to file a tax return and can wait up to 4 years while letting the credit accumulate interest.
You first need to incur a loss before generating money.
And you don’t have to submit a profit and loss statement every year for 20 years.
I’m also currently considering this, but I’m not yet sure what I will decide.
Labor costs can be deducted as contractor services on your taxes.
At the same time, you can still use the tax allowance for other income.
In some cases, you might not even need to file a tax return and can wait up to 4 years while letting the credit accumulate interest.
You first need to incur a loss before generating money.
And you don’t have to submit a profit and loss statement every year for 20 years.
I’m also currently considering this, but I’m not yet sure what I will decide.
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