Expenses that are incurred for professional reasons can be deducted as income-related expenses (Werbungskosten). They can include, among other things, commuting costs (Fahrtkosten), application costs, business trips, further education or training (Fortbildungen), expenses for work equipment (Arbeitsmittel), or professional insurance. According to §9 of the Income Tax Law (EStG, Einkommensteuergesetz), income-related expenses are for the purpose of acquiring, securing and maintaining income.
How high is the lump sum for income-related expenses?
An employee lump sum(Arbeitnehmer-Pauschbetrag) of 1,000 euros per year is taken into account as income-related expenses when submitting your tax return to the tax office. No evidence is required for this and the amount is automatically deducted from your taxable income.
Many employees have far more professional costs throughout the year. Those who wish to claim the full amount of income-related expenses for tax purposes can do so easily by filing a tax return. In this case, the tax office can demand proof in the form of invoices or other receipts. Lump sums can be claimed for many more expenses as well.
Travel costs to work
For each working day, you can deduct the commuter allowance (Pendlerpauschale) of 0.30 euros per kilometer from your taxes for the one-way distance between home and work.
Important: You can only deduct the one-way distance per working day.
The allowance applies regardless of the means of transport and can also be claimed, for example, by cyclists or carpoolers. A maximum of 4,500 euros per year can be deducted with the commuting allowance. In 2021, the allowance will increase to 0.35 euros from the 21st kilometer of one-way travel.
If your commuter costs exceed 4,500 euros for year, you can deduct more than the maximum limit if you meet one of the following conditions:
- If you maintain two households and must travel home for family
- You drive your own car or a company car
- Your expenses for public transport exceed 4,500 euros per year
You must prove these expenses to the tax office in the form of fuel receipts, a logbook, or train tickets.
Business trips & further training
Travel expenses for business trips or further education/training can also be deducted from your taxes. With the kilometer lump sum (Kilometerpauschale), both outward and return journeys can be claimed at 0.30 euros per kilometer.
Note: If the employer has already reimbursed certain costs for the business trip or education/training, they can no longer be claimed them as your own expenses.
Lump sum for meal expenses
In the case of longer absences from your their workplace, employees are entitled to compensation for meal expenses. Provided that the employer does not pay for these expenses, the lump sum for meals is 14 euros for absences greater than 8 hours and 28 euros for absences of 24 hours.
Business trips abroad
Two lump sums apply for business trips abroad:
- the lump sum for meal expenses
- the lump sum for overnight stays
The amount of these lump sums depends on the country travelled to on business. In its BMF-letter from December 3rd 2020, the Federal Ministry of Finance (Bundesfinanzministerium) announced the amount of the foreign lump sums for 2021.
Work equipment (Arbeitsmittel)
Items used predominantly (more than 90%) for professional purposes are fully recognized as income-related expenses (Werbungskosten). Provided that a single piece of work equipment does not exceed 952 Euros (incl. 19% VAT), it can be fully deducted in the same year. In the case of more expensive purchases, the purchase price can be written off over the course of several years.
Only costs that have not already been reimbursed by the employer can be deducted. Many items can be work equipment.
Typical examples are
- Work clothes
- PC, notebook, smartphone
- technical literature
Expenses for job-related moves are fully tax-deductible as income-related expenses. In addition to travel costs, other costs such as expenses for a moving company, real estate agent fees and double rent payments can also be deducted. For some costs, there is a “lump sum for other moving expenses” (Pauschale für sonstige Umzugskosten) that is paid without proof, e.g. for renovation work in the old flat. From June 1st 2020, this amount is 860 euros for the entitled person and 573 euros for each additional person who moves with them (partner and children).
Maintenance of two residences
Those who maintain a second residence for professional reasons can deduct many costs for the second home from their taxes as income-related expenses. These include:
- Rent and utility costs (Miete und Nebenkosten)
- Secondary residence tax (Zweitwohnsitzsteuer)
- Furniture and other home furnishings
- Travel between primary and secondary residence
Note: Since June 1st 2020, no broadcastiung fee (Rundfunkbeitrag) is due for your secondary residence if you can prove that you (or your partner, your flatmates, etc.) already pay a broadcasting fee for your main residence. Important: You must apply to be exempted from paying the broadcasting fee for your second residence!
Conditions for deducting your second residence from your taxes
- The second residence is for professional reasons
- You can reach work at least 30 minutes faster from your second residence than from your primary residence
- You contribute financially to your primary residence (at least 10%).
- The center of your life takes place at your primary residence (family, friends, clubs)
Contributions to professional associations & trade unions
Contributions to professional associations (Berufsverbände) and trade unions (Gewerkschaften) are tax deductible.
All insurances that cover a professional risk can be claimed as income-related expenses (Werbungskosten). This includes, for example, professional liability insurance (Berufshaftpflichtversicherung), accident insurance for occupational accidents (Unfallversicherung) or insurance for legal expenses (Rechtsschutzversicherung).
Insurances that cover a private risk (health and long-term care insurance, life insurance, liability insurance, legal expenses insurance, etc.) do not count as income-related expenses, but can be deducted as special expenses (Sonderausgaben).
Telephone and internet costs
If a private telephone or private internet access is also used for work, the costs can be deducted on a pro-rata basis. Without individual proof, a rate of 20% with a maximum of 20 euros per month, is recognized.