What is the Home Office Lump Sum (Homeoffice-Pauschale)?
The COVID-19 pandemic has made working from home becoming a daily routine for many people. But until then, only taxpayers who met the strict requirements for a tax-deductible work room at home (häusliches Arbeitszimmer) could benefit from tax relief while working from home.
That’s why in the German Annual Tax Act of 2020 (Jahressteuergesetz 2020), parliament passed the so-called Home Office Lump Sum (Homeoffice-Pauschale), which provides tax relief for all employees who switched to remote work due to Corona and do not have a home office to deduct from their taxes. The lump sum is intended to cover the additional costs for electricity, water, heating, and telephone due to working from home and it is also supposed to compensate for a decreased Commuting Allowance (Entfernungspauschale) which you cannot claim when you work from home.
How the Lump Sum Worked from 2020 to 2022
In your tax returns for the tax years 2020, 2021 and 2022, you can simply deduct 5 euros for each calendar day spent exclusively working from home. The lump sum is limited to 600 euros per calendar year and the limit of days that can be deducted for remote work is 120 days.
How the Home Office Lump Sum Works as of 2023
1. The Lump Sum is Made Permanent and Increased
Part of the tax changes in 2023 was to align and simplify the regulations regarding home offices and the Home Office Lump Sum. In addition, the lump sum has been increased: You can now claim up to 210 working days spent at home. For each working day, you can now claim 6 euros. The requirement is that you spend the working day predominantly at home (more than 50% of your working time) and did not work at your primary place of work (erste Tätigkeitsstätte). In that case, you can deduct up to 1,260 euros per year as Income-Related Expenses (Werbungskosten) or as business expenses (Betriebsausgaben) for tax purposes.
2. The Lump Sum Even Applies, if No Other Workstation is Available
To avoid tax inequality, the formerly “limited deduction” (beschränkter Anzug) for the home office (häusliches Arbeitszimmer) has also been revised: until and including 2022, you could deduct up to 1,250 euros per year if, for specific professional activities, you did not have a workplace available at your company. The requirement was that your work room at home met the strict requirements for a tax-deductible home office. You also had to provide proof for your expenses.
As of 2023, the “limited deduction” will be eliminated. Instead, you can deduct the Home Office Lump Sum for up to 1,260 euros per year. This applies regardless of whether you have a tax-deductible home office or not. You do not need any proof or receipts.
This is new as of 2023: If you permanently don’t have access to a workplace for certain tasks at your company, you can still claim the Home Office Lump Sum, even if you did not predominantly work from home but also worked at your primary place of work (erste Tätigkeitsstätte) on the same day. The deductible maximum amount remains 1,260 euros. This is particularly relevant, for example, for teachers who teach at school and prepare for lessons at home on the same day. Pleas note: It should also be possible to additionally deduct commuting expenses on these days for commuting to your primary place of work!
Tax tip: Have your employer certify that for certain tasks, no other workplace is available to you within the company.
3. In Your Home Office the Core of Your Professional Activity Takes Places
If you have a tax-deductible home office that constitutes the center of your entire professional activity, you can deduct the expenses in full as usual or, from 2023 onwards, you can claim a lump sum of 1,260 euros for which you do not need to provide proof. However: For each month in which you do not meet the deduction requirements, you must subtract one twelfth of the lump sum.
4. When Am I not Allowed to Claim the Home Office Lum Sum?
A requirement for claiming the Home Office Lum Sum is that you do not deduct expenses for a tax-deductible home office (häusliches Arbeitszimmer) at the same time. This rule also applied in the tax years 2020 to 2022.
This is new as of 2023: A deduction prohibition also applies if you work in a home office at your second residence and already claim expenses for Double Household Maintenance for this residence.
Tax tip: This regulation applies only from the tax year 2023 onwards. In the tax years 2020 to 2022, it is still possible to deduct both the expenses for the professionally required second residence as well as the Home Office Lum Sum for the same apartment. If you work from home in your primary residence, you can still deduct both the Home Office Lum Sum and the expenses for the double household management!
The Home Office Lump Sum is Included in the Income-Related Expenses Lump Sum
There is a catch for some taxpayers: the Home Office Lump Sum is included in the so-called Income-Related Expenses Lump Sum (Werbungskostenpauschale). Every taxpayer who files a tax return has 1,000 euros automatically deducted from their taxable income as a lump sum for Income-Related Expenses. The Tax Office does not need proof of your actual expenditures for this. Even when your work-related expenses are under 1,000 euros, this fixed rate will still be deducted. Therefore, if your days working from home and other work-related expenses do not exceed 1,000 euros, the Home Office Lump Sum, unfortunately isn’t an advantage.
This lump sum, officially called the “employee lump sum,” (Arbeitnehmer-Pauschbetrag) amounts to 1,200 euros in 2022 and will increase to 1,230 euros in 2023. This amount is automatically deducted from your income, and the tax authorities do not need proof of your actual expenditures.
Unfortunately, if, by claiming the Home Office Lump Sum, you do not exceed the Income-Related Expenses Lump Sum, there will not be any impact on your taxes. If the new lump sum were separate from the Lump Sum for Income-Related Expenses (Werbungskostenpauschale), most employees would directly profit from it. The Federal Ministry of Finance (Bundesfinanzministerium) fears that it could be an “excessive benefit” and therefore unconstitutional.
How to Fill-In the Home Office Lump Sum in Your Tax Return
Employees enter the Home Office Lump Sum as income-related expenses (Werbungskosten) in Form N. Self-employed individuals and freelancers claim the lump sum as business expenses (Betriebsausgaben) in Form EÜR.
The legislator intentionally designed the Home Office Lump Sum to be uncomplicated. There is no obligation to provide evidence. Exception: If you claim the lump sum for working days that you spent at home but also worked at your first place of work (erste Tätigkeitsstätte), it is recommended that you have a certificate from your employer stating that there is no other workplace permanently available to you within your company.
Home Office Lump Sum vs. Commuting Allowance
In some cases, you can offset the lack of Commuting Allowance (Entfernungspauschale) through deducting the Home Office Lump Sum. The Commuting Allowance amounts to 0.30 euros per kilometer for one-way travel to work, and it increases to 0.38 euros per kilometer for distances beyond 20 kilometers one way (applicable for the years 2022 to 2026).
It depends on your route length to work as well as vehicle expenses, fuel price, and fuel consumption to decide whether you should use the Home Office Lump Sum or rather claim the Commuting Allowance. The lump sum of 5 euros per day (2020 to 2022) is equivalent to a daily commute of approximately 17 kilometers. As of 2023, the lump sum of 6 euros per day corresponds to a daily commute (one way) of exactly 20 kilometers. If you have a longer commute, the Commuting Allowance makes more sense financially. If you have a shorter commute, the Home Office Lump Sum provides more tax benefits.
What Should I Consider When Working Remotely?
Many are unaware that working remotely in the sense of telecommuting (Telearbeit) is a legally defined term. Employers are required to provide a computer workstation in the employee’s home and agree on weekly working hours as well as the duration of this arrangement. On the other hand, mobile working (mobiles Arbeiten) is not regulated by law although the German Working Hours Act (Arbeitszeitgesetz) still applies. Remote work should be clearly negotiated between employers and employees.
Data Protection and Surveillance Authority
Even when working from home, data protection laws such as GDPR (General Data Protection Regulation/ DSGVO) must be taken into account. Employers are responsible for taking appropriate technical and organizational measures to ensure protection for personal rights and processing sensible data. An example of this is exclusively using company work equipment and encrypted communication channels.