Whether teacher, manager or appraiser: Many people do a large part of their tasks from their home desk. If you work at home, you can deduct the costs of your study from tax in certain cases – as business expenses or business expenses.
The strict requirements for leaving a home job also apply in Corona times. However, if your employer has ordered home office, you have a good chance of getting more money back with your tax return. In addition, there is an option for 2020 and 2021 with the home office flat rate so that you can save some taxes even without a recognized office. Below is a look at the details for a home office deductible in Germany and the requirements:
When are costs for a study deductible?
Actually, there is a prohibition of deductions for expenses that arise from working at home (Section 4 (5) No. 6b EStG in conjunction with Section 9 (5) EStG). However, the legislature allows two exceptions:
- If there is no other job available for your professional or business activity, you can claim your costs up to 1,250 euros per year (limited deduction).
- If the study is the focus of your entire professional or operational activity, your costs are fully deductible.
If you state the cost of a home office as business expenses or business expenses in your tax return, you can reduce your taxable income and thus ensure that your tax burden is lower.
Limited cost deduction up to 1,250 euros
The first exception (“no other workplace”) applies, for example, to professional groups such as teachers and field workers without a desk in the school or in the employer’s office. This also applies if your employer does not provide you with an individual workplace in the company and you therefore do your professional tasks from your home office. It is then possible to deduct advertising expenses for your own expenses – but no more than 1,250 euros per year. You should get proof from the employer that there is no job available in the company for these activities.
If, on the other hand, you normally have a job there and you have agreed with your employer that you work from home one day a week, for example, this is not enough. You cannot then deduct any costs for a study.
Full deduction of costs if the focus is on professional activity
The second exception (“focus of activity”) applies above all to the self-employed such as freelance journalists, writers and artists. If you mainly work from home, you can deduct the full cost of the home office.
Special situation due to the corona pandemic
In March 2020 there was the first corona lockdown and millions of employees had to go to the home office as quickly as possible – and often stayed there for months. It didn’t matter whether they had their own study or, for example, had to work at the kitchen table, i.e. in a so-called work corner.
The corona pandemic shows that the tax regulation of the office is no longer up-to-date and problematic in practice. The case law has been improved accordingly: Do you not have your own study, but only a work corner? Then you can possibly benefit from the new home office flat rate in 2020 and 2021. However, you have to choose one of the two alternatives in the tax declaration:
- Study: You meet the tax law requirements for a study because you work in a separate room that you use at least 90 percent for business purposes. Then you can deduct the costs for the “home office”.
- Home office flat rate: You do not meet the requirements for a study because you only have one work corner. Then you can instead deduct a home office flat rate up to a maximum of 600 euros per year.
In the following, we use sample calculations to show you how you can proceed according to our assessment:
Maybe you live in the country, so you have the space for your own study and thus meet all spatial requirements. Let’s assume your employer instructed you to work at home because the risk of infection would be too great if all employees came to the office. So if your employer does not provide you with another workplace or you cannot work in your usual place because of infection protection, then you can claim your study room costs for tax purposes for this period. The longer you’ve worked there, the higher the amount that you can deduct.
For example, if you spent a maximum of two days a week there during a five-day working week, you can deduct up to 1,250 euros for this period (limited deduction). This is the maximum annual amount.
But if you worked at least three days a week or even the entire time in your study, then it was the focus of your professional activity during this period. And for this you can set the unlimited costs.
The following example illustrates how you can deduct your advertising expenses in 2020 for a five-day work week:
- Period: In January and February 2020 you drove 50 kilometers to your workplace on a total of 30 working days. The one-way route (distance) is 25 kilometers. For this you can deduct 225 euros as a flat-rate distance allowance (30 * 25 km * 0.30 euros). Note: In 2021, the kilometer flat rate will increase to 35 cents from the 21st kilometer onwards. Accordingly, you can deduct slightly higher travel costs from 2021. In the example this would be 180 euros for the first 20 kilometers (30 * 20 km * 0.30 euros) and a further 52.50 euros from the 21st kilometer (30 * 5 km * 0.35 euros), i.e. a total of 232, 50 Euros.
- Period: The lockdown will come in March and your boss will send you to the home office until the end of July, where you will only work. For these five months, your study is the focus of your professional activity. You determine your study room costs by taking your monthly rent and ancillary costs into account, among other things, and this may come to 350 euros per month, a total of 1,750 euros for March to July. For example, if you drove to the office every day until March 10th, you can still charge seven trips with the distance flat rate, i.e. 42 euros in travel costs. Only the working days on which you actually commuted count. It is unclear whether the study room costs in March (due to the period from March 11th to March 31st) can be reduced somewhat when looking at the exact working day.
- Period: In the summer the infection situation improves and the boss wants you to work in the office for three days from August – of course, with a distance from the few other colleagues. Because there are not enough workplaces there for all employees, you still have to work in your home office two days a week until the end of November. There is no other workplace available to you. For these four months there are costs of 1,400 euros (4 * 350 euros), but you can deduct a maximum of 1,250 euros. The maximum annual amount applies to this phase. You can combine this with the periods in which the study is the focus. For the 50 working days that you commuted to the company, you can deduct 375 euros for travel expenses (50 days * 25 km * 0.30 euros).
- Period: From November 2, 2020 there will be a partial lockdown in Germany, from December 16 there will even be a hard shutdown. Your employer will be ordering 100 percent home office again from November. That is why your study will again be the focus of your professional activity in November and December 2020. For this you can deduct a further 700 euros in advertising costs (2 * 350 euros). There are no travel costs to work.
Result: Over all four periods, you can deduct a total of EUR 3,700 in office costs and EUR 642 in the commuter allowance.
This example is based on our legal understanding. We rely on a specialist article by Dr. Hans-Peter Dellner, presiding judge at a finance court (Neue Wirtschaftsbriefe NWB, No. 41 of October 9, 2020, p. 3060 ff.). Perhaps one or the other tax office will contradict this point of view. Unfortunately, there is still no reliable case law or administrative instruction on this. However, there are also many people who work in the tax authorities who have had their own home office experience. Therefore, you should try to claim higher office costs in your tax return.
What requirements do you have to meet?
In order for you to be able to deduct the costs for a study, various professional and spatial conditions must be met.
Domestic connection – according to its location, function and equipment, the room is integrated into your domestic sphere, i.e. it belongs to your private apartment or house. Accessory rooms in the basement or in the attic can also be used as a home office if, due to their close proximity, they are connected to your private living space as a common living unit.
This does not apply to rooms that do not correspond to an office in terms of their equipment and function, for example operating rooms, storage rooms and exhibition rooms. A work corner is not enough, it has to be a closed room. In addition, there must be enough living space in addition to the study.
Professional or operational use – In a study you mainly do intellectual, written, administrative or organizational work. This does not necessarily have to be office work, because you can also use a home office for intellectual, artistic or writing activities. However, you have to use this (almost) exclusively for professional or operational purposes.
Subordinate private shared use of a maximum of 10 percent is permitted. If more than 10 percent of the space is used privately, no deduction is possible at all – not even partially. The Grand Senate of the Federal Fiscal Court (BFH) shattered hopes that a corresponding cost allocation would be possible due to professional use in January 2016 (decision of July 27, 2015, Az. GrS 1/14).
Office equipment – If you are a desk worker, then your study should also be office equipment accordingly. A bed, children’s toys and other private things should therefore not be found in it.
Only if these spatial requirements are met and you use the office-like room almost exclusively for business, the tax office will recognize it as a home office. Often it sends a questionnaire beforehand, which you have to fill out.
These requirements also apply in Corona times, when millions of employees have to work from home. Often the employer has ordered home office. If this is the case with you and you are not allowed to work in the company, get this in writing from the employer.
The period and the number of working days per week should be stated in the employer certificate. Also take photos of your home workplace. Because when processing your tax return due in 2021, the tax office may want to see further evidence that your home was at least temporarily your place of work in 2020.
Therefore, it is best to also note in a calendar in 2021 which working days you worked at home and when you commuted to the company.
What costs can you deduct and what cannot?
Determine proportionate costs – You deduct the costs of your home office proportionately from tax as business expenses or business expenses. If no direct allocation is possible, share these pro rata costs according to the ratio of the area of the study to the total living space, including the study. Above all, this includes:
- Rental fee
- For property owners instead, the building depreciation and
- Debt interest on loans that have been used to purchase, manufacture or repair the building or the condominium,
- Water, sewage and energy costs,
- Cleaning costs,
- Property tax,
- Garbage collection fees,
- Chimney sweep fees,
- Contributions to the tenants’ association (for owners: house and landowners association),
- Incorrect booking submission,
- Home and contents insurance,
- Legal protection insurance for property owners as well
- Renovation costs that affect the entire house (for example heating, front door, windows and roof) or common areas such as the stairwell.
Fully deductible costs – While you can only partially deduct the above-mentioned ongoing and one-off costs, you can claim the renovation costs for the study in full. This also includes your expenses for furnishing the room, for example wallpaper, carpets, window curtains, curtains and lamps.
Specify furnishings as work equipment – Remember to include the costs of furnishing your study such as shelves, desk or office chair as advertising costs. These costs are fully deductible, as are those for the furnishings.
You can claim work equipment for tax purposes regardless of whether the tax office recognizes your office. It doesn’t matter where the items are in your home. The only requirement is that you use these items almost exclusively for professional or business purposes.
Furniture can be sold as low-value assets immediately if the purchase price including VAT does not exceed 952 euros (800 euros net) (up to 2017: 487.90 gross, 410 euros net).
In the case of higher acquisition costs, you have to spread your costs over the duration of use. This is called depreciation. The official useful life for office furniture, for example, is 13 years.
This is regulated in the “Depreciation table for generally usable fixed assets” (printed in Federal Tax Gazette 2000 I, page 1532). “AfA” stands for depreciation for wear and tear. For example, if you bought a used desk, you can deduct the previous useful life from the usual useful life of 13 years and spread the purchase price over the remaining useful life.
In the year of purchase, you have to reduce the so-called annual depreciation on a monthly basis.
Example: If you bought the desk in July 2020, you can only write it off for six months, namely for the period July to December 2020. If it cost 1,300 euros, the annual depreciation is 100 euros. For 2020 you can only write off 50 euros.
Note: The depreciation potential can be lost. With a 13-year depreciation period for new office furniture, it often happens that the costs cannot be fully deducted. This is the case, for example, when you retire. The continuation of the example illustrates this: If you retire on December 31, 2020, you will no longer need the desk you bought in July 2020 for work.
The depreciation volume for 12.5 years (equivalent to 1,250 euros) would be lost. The 50 euros advertising costs would remain.
Therefore, it would be more tax-wise to buy a low-value asset – such as an inexpensive used desk – that you can write off immediately. Attention: You should keep the purchase receipts during the entire depreciation period and for a few years afterwards.
Special case of garden renewal – You can allocate the costs of a garden renewal proportionately to the costs of your home office if damage to the garden has occurred during a repair of the building. However, only those expenses are to be added to the costs of the study, which serve to restore the original condition.
Luxury objects are left out – this category includes, for example, works of art that are primarily used to decorate the study. The cost of such items does not count towards the deductible expenses.
In this way you can also save taxes
Maximum amount personal – The case law has now assessed the maximum amount of 1,250 euros for a home office in a personal manner (BFH, judgments of December 15, 2016, Az. VI R 53/12 and Az. VI R 86/13). This means, for example: If a couple uses a study together, everyone can claim their own costs up to the maximum amount. With these rulings, the BFH has given up its previous object-related consideration of the study and also contradicts the tax authorities.
Object-related means that the tax office has previously only allowed the deduction for a study up to a maximum of 1,250 euros, even if several people use it together.
However, the BFH changes this view and now allows the deduction for each individual taxpayer who needs and uses the home office and bears the costs for this. It does not depend on a specific division of use between two partners. This can be found in the BFH judgment with the file number VI R 86/13. Here two partners have shared a study and the costs for it.
In the judgment with the file number VI R 53/12, the married teachers owned a single-family house in equal parts. Here the BFH made it clear that in such cases both co-owners share half the costs for the jointly used office.
If everyone fulfills the requirements for a home office, everyone can claim their costs for tax purposes – up to a maximum of 1,250 euros for each individual, up to a total of 2,500 euros in the joint assessment. If both partners jointly bear the rental costs, then this can be viewed analogously to the case of the two co-owners.
However, this person-related maximum amount means that you can only deduct a maximum of 1,250 euros per year if you use several domestic offices – regardless of whether at the same time or one after the other or in one or different households. This was determined by the BFH (judgment of May 9, 2017, Az. VIII R 15/15).
In that case, the taxpayer had two places of residence due to having two households. He prepared seminars in both apartments and therefore used two study rooms at the same time. The plaintiff earned income from self-employment as a lecturer. The BFH cut the deductible costs for the study to the statutory maximum of 1,250 euros.
This limitation always applies if the home office is not the focus of professional or operational activity. It also applies if someone uses two offices in the same household or – for example after moving – in different apartments.
Hallway, kitchen and toilet – The cost of renovating a privately used bathroom or hallway cannot be included in the expenses for a study. The bathroom and hallway are for private residential use only. Construction measures relating to a privately used room do not lead to general building costs, which are divided according to the area ratio and are proportionally deductible (BFH, judgment of May 14, 2019, Az. VIII R 16/15).
Even if you have determined a professional share of your toilet use, you cannot deduct the costs that were incurred for the renovation of a guest toilet. With this attempt, an auditor of the tax office failed before the tax court Baden-Württemberg with judgment of January 21, 2013 (Az. 9 K 2096/12). So keeping a toilet diary didn’t do him any good.
In another case, the BFH clearly decided that costs for mixed-use ancillary rooms are not deductible at all as soon as the private shared use exceeds the “irrelevance threshold” (BFH, judgment of February 17, 2016, Az. X R 26/13). A self-employed life coach who offered her services from her home office wanted to deduct a proportion of business expenses for the commercial shared use of the hallway, toilet and kitchen – unsuccessful. Their argument that they could deduct the entire rental costs – including for the ancillary rooms – of an external office did not convince the judges.
Because in this case there is an exclusively operational use. In the case of mixed use, there is consequently no deduction as a business expense or advertising expenses. Only the costs for the office itself led to operating expenses in the decided case.
Renting out to the employer – One option may be to rent out a room in your apartment to your employer. Then you don’t have a home office, but use your employer’s office. To do this, you conclude an open-ended rental contract and – provided the tax office recognizes the contract – earn income from renting and leasing.
In return, the full cost deduction beckons you with this type of income. It is important that the overriding interests of your employer prevail. Indications for this are, for example, that you do not have a suitable workplace in the company, that your employer has also concluded such contracts with other employees or that you are forced to use the room outside of normal business hours.
What should you watch out for when claiming your home office deductible?
Center of activity – The decisive factor for assessing whether the home office is the focus of your entire professional or operational activity is the content-related, qualitative focus of all activities that you carry out. The amount of time is only an indication. Therefore, the home office can also be the focus of activity when working in the field.
It is possible that you only carry out a professional or operational activity that is of equal quality in terms of quality, both in your home office and at the place of work outside the home. Then the focus of your entire professional and operational activity is in your home office, provided that you work more than half of your working hours in your home office. For university professors with teaching duties and judges at the district court, the highest court has already decided that the focus of their professional activity is not in their home office.
No other job – You have to prove that there is really no other job available for your professional or operational activity. The nature of your work can provide clues for this. A corresponding certificate from your employer can be an additional indication.
If you carry out several professional or operational activities at the same time, the tax office will check for each activity whether you could use a different workplace. However, another place is only available to you for your professional activity if you can access a workstation with office equipment that can be used for your official office work at any time.
Teleworking place – If you have set up a teleworking place at home, where you always work on Mondays, for example, you cannot deduct the costs. There is another workstation available to you in the office (BFH, judgment of February 26, 2014, Az. VI R 40/12).
Pool work place – Something else may apply to pool work places. If eight auditors from a tax office only have three pool workstations available, then they can deduct the costs for their home office. This has been confirmed by the BFH (judgment of February 26, 2014, Az. VI R 37/13).
Use for different purposes – If you use a home office for different work – more precisely for several types of income – for example as an employee and as a freelance writer, then you have to divide your expenses for the room between the different types of income. So you write down how long you use the room for which work. You can then assign your effort to the respective type of income according to the proportion of time used.
Example: You spent 4,000 euros a year on the study. Half of the space is used for non-independent work and half for independent activities. So you have costs of 2,000 euros for each type of income.
In total, however, you can only deduct the maximum amount of 1,250 euros. You can deduct this amount from your income as a writer as business expenses, for example. Alternatively, you could deduct 1,250 euros as advertising expenses.
However, the maximum amount does not have to be divided into partial maximum amounts for the various types of income, as the Saxon Finance Court erroneously did. In one case, it estimated that the taxpayer used half of his office for self-employed and half for non-self-employed income. It then divided the maximum amount of 1,250 euros accordingly and formed partial maximums of 625 euros each.
It then only wanted to allow operating expenses of 625 euros. The tax office had even completely refused the tax deduction. The BFH considers both to be wrong (judgment of April 25, 2017, Az. VIII R 52/13). The taxpayer can therefore fully exhaust his expenses up to the statutory maximum amount of 1,250 euros.
Tax return – As an employee, you enter the costs for the office as well as all income-related expenses in Appendix N of your tax return. For the self-employed, space costs are part of the operating expenses.
Entrepreneurs – self-employed people who have rented company premises but are unable to carry out confidential administrative activities there, for example, are allowed to deduct up to 1,250 euros for a home office. This was decided by the BFH for a speech therapist who even leased two practice rooms (BFH, judgment of February 22, 2017, Az. III R 9/16).
Most of his four employees practiced there during normal working hours. The desk was not available to him for office and accounting activities at this time, which is why he did this work from home. The BFH decided that he could not be expected to do it in the practice rooms – even outside the opening hours.
Sales profit attributable to the office is tax-free
Let’s say you’ve been able to deduct the cost of your study from tax and the space is in a property that you own. If you decide to sell the property within the ten-year speculation period, a tax trap lurks.
The tax office may want to tax a profit from a private sale transaction, which is proportionally attributable to your home office, because this use is not considered to be homely in the opinion of the tax authorities. The decisive factor here is the usable area ratio.
However, the Federal Fiscal Court contradicted this view (judgment of March 1, 2021, Az. IX R 27/19). For the exemption from taxation due to personal use, it is irrelevant that a small part of the condominium was only used for business purposes.
The Finance Court (FG) Baden-Württemberg already rejected taxation in the lower instance (judgment of July 23, 2019, Az. 5 K 338/19). The FG Cologne also ruled in favor of the plaintiffs (judgment of March 20, 2018, Az. 8 K 1160/15).
Tax trap for entrepreneurs
The self-employed and tradespeople usually keep their residential property as private assets. This can also work for a study inside. However, its value must then not be more than 20 percent of the common value of the entire property and not more than 20,500 euros (Section 8 Income Tax Implementation Ordinance).
This de minimis limit can also easily be exceeded if the property has increased in value in the meantime. Consequence: The study is then part of the business assets.
After all, there can be a rude awakening when selling a house or giving up a business. Even if no tax is due for the private part of the building, the profit from the sale of the study as a business part of the building must still be taxed. And this could be unexpectedly high.
The pro-rata sales proceeds from which the residual book value (= acquisition costs minus regular depreciation until the end of operation or removal) is deducted. Even if the operating expenses were limited to 1,250 euros per year, there is no profit adjustment with regard to the non-deductible part of the depreciation (BFH, judgment of June 16, 2020, Az. VIII R 15/17).
As a result, a limited deductible study can turn out to be a tax trap when selling a house or giving up a business. If, on the other hand, the study is the focus of the entire professional activity, then the rather high operating expenses deduction is usually an advantage during the entire period of use.
Home office flat rate for 2020 and 2021
If you work from home in 2020 and 2021 and do not meet the tax requirements for a study, you can benefit from the newly introduced home office flat rate.
Accordingly, you can deduct 5 euros for every working day that you spend exclusively in the home office. This deduction is limited to 120 days, so that you can deduct a maximum of 600 euros per year. However, the home office flat rate is included in the flat rate for advertising expenses. Therefore, only employees who come with their total advertising expenses over 1,000 euros can benefit from it.
If you have a study, you can still deduct your study costs. Your co-living partner who only has a work corner can also claim the new home office flat rate. So, you can combine that in the joint tax return.
The daily flat rate covers the additional expenses for the use of the apartment, in particular for electricity, heating and other room costs. If you drive to work on a working day, for example to pick up mail, you can claim the flat-rate distance fee, but not the flat-rate home office fee.
There is also no right to choose, but either travel expenses or home office flat-rate on a specific working day. You can also deduct professional telephone and internet costs. For this, there is a limit to 20 percent of the invoice amount without individual proof, up to a maximum of 20 euros per month.