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Study & Home Office: What Can I Deduct From Tax?

Study & Home Office: What Can I Deduct From Tax?
admin
26. May 2021

For many, working from home is a lifestyle of choice: you can skip long commutes to work and possibly have lunch with the children. Since the beginning of the COVID-19 pandemic, the home has become a regular workplace for 45% of all employees in Germany.

But how should the home office be viewed from a tax perspective? When can your study be tax-deductible? How do you claim your home office in your tax return, even if you don't have a study? We clarify these questions here.

What is the difference between a study and a home office?

It’s easy to assume that ‘home office’ and ‘study’ are synonymous, but with the introduction of the home office lump sum (Homeoffice-Pauschale) in 2020, the difference has widened, specifically from a tax perspective. Both study and home office are tax-deductible, but under different conditions.

‘Home office’ implies that you’re working from home. Whether at the desk, at the kitchen table, or from the couch. A ‘study’ is a separate room in your living space used specifically for work and work only. To have a tax-deductible study, strict requirements apply.

Home office & study: When are they tax-deductible?

The Federal Fiscal Court has set strict guidelines on what qualifies as a study:

Walled Space in Your Home

Your study must connect to your apartment, i.e. it must belong to your private apartment. In addition, it must be spatially separated from other rooms. A simple work corner in the living room is not enough. Apart from the study, at least one additional room should be available for private use for each resident of your apartment.

Good to know: There are several costs you can deduct from taxes if you are living in a rented apartment. Click here to find out more.

Professional Use Only

Simple as it sounds, the reality is complicated: you have to use your study solely for professional activity. Private use is excluded. If you write private emails once, that’s fine. However, if you pursue your hobbies in your study or receive guests (recognisable by a guest bed), you will raise red flags. You can only spend a maximum of 10 per cent of your private time in the study. If you exceed this percentage, no tax deduction is possible at all. There is no wiggle room and the study has to be compliant with the Federal Fiscal Court ruling of January 2016.

Unlimited Deductible Study

If you want to deduct more than just 1,250 Euros a year, all your work should be centred in your home office. This is the case with homeworkers. But this variant applies mostly to the self-employed.

The advantage here is that you can declare the expenses for rent, ancillary costs, and renovations in the tax return. However, this applies only to the area specific to the study.

What if I don't have a study and still work at home?

Since 2020, you can claim your home office in your tax returns even if it doesn’t have a dedicated space, thanks to the home office lump sum (Homeoffice-Pauschale). This counts as income-related expenses (Werbungskosten). The lump-sum provides up to 5 Euros per day and can be claimed on a maximum of 120 days a year. You can receive a maximum of 600 Euros, applicable only if you fall above the employee tax allowance of 1000 Euros. You can read about what all of this means here.

What can I do in the study and home office?
There are many costs involved in furnishing a study. You can deduct the following costs proportionately from the total rent:

  • Rental fee
  • Water, heating, and electricity costs
  • Cleaning costs
  • Costs for furnishing the study
  • Renovation costs
  • Insurance

Note that the depreciation over the useful life applies to the work equipment and other items.

Be Noted on the Principal of Proportionality

A crystal lamp for the ceiling of a study is not viewed the same way as a new Apple Mac Pro that may be necessary for work. The tax office does not accept luxury items to be tax-deductible. Not only will it cancel such items but also suspect the existence of a valid study.

When in Doubt, the Tax Office Visits the Study

Some taxpayers try to cheat on their tax returns and use a work corner in the living room as a study. Or, they set up a study that doubles as a guest room. If the tax officer suspects the existence of a legitimate study, you need to stay prepared for a home visit!

Therefore, ensure that your study meets the tax office requirements of what a study should be. If you don’t have a study, you can also deduct certain items as work equipment. In case of doubt, this is the safer way. The study is a very controversial topic when it comes to tax returns.

Here’s how you know if your study is compliant with the tax office guidelines:

  • You use the study almost exclusively for work
  • You have no other workplace available or your home is also the focus of your work
  • Your study is set up like a workspace with no irrelevant furniture or accessories
  • Your study is separated from the rest of the apartment by a lockable door

If you do not have these points, there are other ways to save taxes! You can sell certain items as work equipment (Wernubgskosten). For example, a computer or a desk. When in doubt, this is the safer way. Be noted that for many acquisition items, depreciation over a fixed useful life applies.

Study: New Laws and Special Cases

In a ruling from December 2016, the Federal Fiscal Court no longer applies the maximum limit of 1,250 Euros to the study but to the people who used it. In doing so, he legitimised that several people can use the same room and—if they so claim—can receive the maximum amount of 1,250 Euros.

On the other hand, this ruling also means that if a single person needs two offices, the maximum amount can be accounted for once. This then applies to two offices in the same apartment as well as to different apartments.

Another variant is renting out the office to your employer. Thus, the same room changes from a home study to an office for your employer. If the tax office recognizes the contract between you and your employer, you have a permanent, indisputable home office. However, you have to pay taxes on the received rental payments as income from renting and leasing.

In case you don’t have an employer and don’t meet the requirements for a home office, a rented desk in an office or co-working space is an excellent alternative. Then there are no doubts about the workplace being focused on professional activity or the size of the apartment.