⚖️ Germany’s Federal Constitutional Court issued a verdict for students who earn money on the side at the end of 2019. The court decided that all costs in the context of “initial education”, such as a Bachelor’s degree or a first-time apprenticeship without any prior qualification, are to be considered special expenses (Sonderausgaben). However, expenses for your secondary education can be deducted as income-related expenses (Werbungskosten).
The difference: Special expenses do not allow any possibility for a loss carryover, which means losses during your initial studies (primary degree) cannot be accumulated and taken into account during the next tax year(s). Additionally, the deductible amount for these special expenses is limited to €6,000 per year. However, there is no limit when the costs are deemed to be income-related expenses.
What this means for you: Since only a few students are likely to earn enough to land above the annual tax-free allowance of €10,408 (as of 2020), most students in obtaining their first degree or apprenticeship will not receive any tax relief. You will only be able to deduct your costs as a student as special expenses if you have earned more than the annual tax-free allowance. Read on to find out more. ⬇️