Which study costs can students in Germany deduct?
When the Federal Constitutional Court issued a long-awaited ruling on this topic in November 2019, it was more of a let-down than relief for the student community.
According to this ruling, all costs incurred while attaining the first degree (Erststudium)—be it a Bachelor’s degree or the first vocational training in the absence of a previous degree—are considered special expenses or ‘Sonderausgaben’In contrast to income-related expenses, special expenses are various costs that are legally considered to be related to your private life management – for example pension expenses, health insurance, or …
Read more .
Expenses for the second degree, on the other hand, may be deducted as income-related expenses (Werbungskosten).
So, what’s the difference between the two? Contrary to the case of income-related expenses, loss carry-forward (Verlustvortrag)Also known as loss carryover, a loss carryforward allows losses from one tax year to be carried forward into the following year(s). This can reduce taxable income, and therefore your …
Read more is not possible for special expenses. This implies that losses (Verluste) in the first degree cannot be accumulated. Instead, it must be claimed in the same year. Additionally, the deductible amount for education costs is limited, but the same limitation does not apply to what’s deductible as income-related expenses! In a nutshell, this ruling makes it difficult to deduct Erststudium from taxes.
Since a handful of students are likely to earn more than the annual tax allowance (Steuerfreibetrag) of 9,744 Euros (as of 2021), most first-degree students are unable to claim the expenses of the first degree. Only those who earn more on the side can deduct their costs as special expenses – you can find more information on this below on this page. ⬇️
First degree ≠ First training!
The definition of what qualifies as ErststudiumThe first degree (apprenticeship or higher education) you are working towards after graduating from high school or secondary school.
Read more is not as straightforward as it appears at a glance.
A second degree or ‘Zweitausbildung’Any other degree (apprenticeship or higher education) that you are pursuing after finishing your primary degree (Erstausbildung).
Read more is any training that follows the first vocational qualification (Ausbildung or Studium). This means that your first degree (Bachelor’s degree, Diploma, etc.) can also count as a second degree under certain circumstances. You’ll need to pay attention to this detail if you have already completed vocational training (Berufsausbildung) before your first degree.
In this case, you can fully deduct your student expenses (semester fees, travel costs to the university or library, stationery costs, etc.) as income-related expenses or ‘Werbungskosten’. You can find more information on the topic of deductible costs for students here.
What are the Ways of Deducting Study Costs From Taxes?
Option 1: When Expenses Exceed Income
Even if you cannot deduct your Erststudium expenses as income-related expenses, you can still declare them as study costs in your tax return.
A maximum of 6,000 Euros in education costs can be deducted as special expenses per year. These reduce your total income and your tax burden.
To benefit from this, your income must be taxable i.e. you must have a ‘steuerpflichtige Beschäftigung’, failing which, your study costs cannot be deducted as special expenses. You can only deduct them in the year they are incurred, and cannot carry them forward as losses to later tax years.
Option 2: Earning First Degree While You’re Employed (Dual-Study Programme)
An exception that allows you to deduct income-related expenses during your first-degree course, is a dual-study programme. In this case, while you are a student you are employed as well (Dienstverhältnis). In this case, the ‘practical’ part of your education is fulfilled and remunerated by your employer.
If you have opted for a dual study programme, you can deduct an unlimited amount of your study costs as income-related expenses. A loss carry-forward would also be conceivable. Because you have a regular income, this will probably exceed your expenses, and, thus, close this off as a viable option for you.
Bonus: Education Allowance for Parents
If your parents support you financially during your studies, they can include these expenses in their tax return as an education allowance (Ausbildungsfreibetrag). This entitles them to a tax allowance of 924 Euros (as of 2021). The requirements:
- You are of legal age
- You are in training (Studium)
- You don’t live in your parents’ household
- Your parents are entitled to child benefit for you (depending on your age)
As you can see, there are various ways to save tax on your first degree. Choose the option that works best for you!