The income on which we self-employed workers must calculate the income tax to be paid derives from the difference between the remuneration collected in the year and the expenses paid in the same period.
However, not all the costs we have incurred can be subtracted from the revenues. In fact, only the costs related to the activity, actually paid during the year and documented, can be deducted. Let’s see in detail what these characteristics of deductible costs are.
INHERENCE
To be considered deductible (ie to be able to subtract them from the revenues that determine income) the costs must be inherent to our business , that is, they must concern the work we do and not our personal sphere.
Example If we buy the computer for our study, the purchase cost can be deducted according to the rules determined by law. However, if we buy the same computer exclusively for our home, the cost cannot be deducted from our self-employment income.
DOCUMENTED EXPENSES
In addition to being inherent in our business, the expenses to be deducted must also be documented. That is, for each cost, tangible proof of the expense must be presented . We must therefore keep in our archive the invoices , the tax receipts , the contracts drawn up in writing, the commercial letters, the payment certificates. Only in this way can we prove that we have really incurred the expenses we want to deduct.
Warning! To deduct a cost, it is not enough to present a receipt or an anonymous document .
CASH PRINCIPLE
An important aspect to consider in determining deductible costs is the cash principle. In calculating our self-employment income, we must consider the revenues actually collected in the tax period (coinciding with the calendar year, from January 1st to December 31st) and the costs actually paid in the same period of time.
ExamplesCase A) A craftsman provides a service on December 30, 2011 and issues an invoice for 100 euros + VAT. The person who received the benefit makes the payment on 4 January 2012.The revenue of 100 euros will contribute to form the artisan’s taxable income in the 2012 tax period.Case B) In December 2012 a professional receives an invoice regarding the rent of the studio. The payment of 400 euros + VAT takes place in January 2013. The cost of the lease (400 euros) can be subtracted from the taxable income in 2013.
EXCEPTIONS
The general rule of the “cash principle” has some exceptions. In fact, the law provides that some costs must not be deducted in the year in which they are paid , but in the year in which they are accrued, that is to say in the year in which they are linked to revenues.
In particular, the following must be deducted on the basis of competence:
– depreciation of capital goods
– leasing fees
– the costs of restructuring Realty
– the portions of the severance pay ( TFR ) accrued during the year
ExamplesCase A) A professional stipulates a leasing contract for office furniture on 1 October 2011, paying an initial maxi-rent of 5,000 euros + VAT upon signing. The amount of the maxi-rent must not be deducted entirely in 2011, but must be divided over the duration of the leasing contract, subtracting a portion of the taxable income every year.Case B) A craftsman has four employees, for whom in 2011 he accrues a portion of severance pay of 400 euros. The craftsman can deduct the amount of 400 euros from his 2011 income, even though this amount has not been paid. In fact, the law provides that the TFR must be paid only when the employment contract is terminated
