The Regulation for a Home Office until 2022
Since 2007, it has become difficult for taxpayers to deduct costs for a work room at home (häusliches Arbeitszimmer) from their taxes due to a lot of past controversy in the tax courts (Finanzgerichten). If you do choose to declare a work room on your tax return, the tax office (Finanzamt) will check your details very carefully.
A 2017 letter from the Federal Ministry of Finance (Bundesfinanzministerium / BMF) affirmed that § 4 Paragraph 5 of the Income Tax Act (EStG) typically prevents work rooms and furnishing costs from being deductible. However:
There are Two Exceptions that Allow You to Deduct Your Work Room
If your company has not provided you with another workstation for your professional activity, you can deduct up to 1,250 euros annually in work room expenses. This is called a limited deduction (beschränkter Abzug).
You may deduct unlimited expenses (unbeschränkter Abzug) if the core of your professional activities takes place in your work room at home.
These expenses can be deducted as Income-Related Expenses (Werbungskosten) in your tax return, self-employed persons can claim them as business expenses (Betriebsausgaben).
But before you can deduct your work room expenses, the tax authorities must officially recognise it. The room must meet certain conditions in order to be deductible – you can read about how this works below.
What is a Tax-Deductible Work Room?
According to a 2016 ruling by the Federal Court of Finance (Bundesfinanzhof / BFH), a work room is a room that is almost exclusively used for professional activities and is integrated into the domestic sphere of your apartment or house. “Domestic sphere” means that it can also be a room in your attic or basement, as long as it is a part of your private living space.
The Room Must Meet These Requirements:
It must be a separate room with a door, meaning a corner in the living room does not count. Ideally, it shouldn’t be a walk-through room: there were only a few cases where the tax courts accepted walk-through rooms as tax-deductible work rooms.
Private use of the room must not exceed 10%. So it’d be best to remove the ironing board and guest bed!
All residents of the apartment/house must have enough living space for private use. If you live alone in a 2 room, 50m² apartment and your work room takes up 30m², it will not be recognised by the tax office.
The room should be equipped like an office. According to the Federal Court of Finance (Finanzgericht), it should be suitable for “intellectual, written, administrative, or organisational work.” As usual, there are exceptions to this rule: In 2010, a musician won a case against the Cologne tax court that her music room at home, where she rehearses her musical pieces, was recognised as a tax-deductible work room – even without typical work equipment.
Your work room cannot be accessible to the public, nor can employees work there. If this were the case, it would be domestic business premises (häusliche Betriebsstätte), not a home office (i.e. an exhibition room, law firm, or practice in one’s home). The expenses for the room and equipment would then be fully tax-deductible as business expenses (Betriebsausgaben).
Who Can Deduct a Home Office?
1. No Other Workstation Available: Limited Deduction
Even when the core of your work doesn’t take place in your work room at home, you are still eligible for a limited deduction of up to 1,250 euros if part of your work must be completed from home due to no other workstation being provided to you.
Some examples of this include:
Teachers or professors who prepare their lectures and correct exams at home and have no personal desk at school to perform this.
Sales agents who perform most of their work on site with customers and cannot prepare accounts and travel reports in the office of their employer.
However, you must be able to prove to the tax office (Finanzamt) that your work room is necessary for your professional tasks and is not simply for convenience or comfort. If you only use this room from time to time when it is too noisy in the office, then it is not out of necessity. You should obtain a declaration from your employer stating that certain tasks must be performed in your work room at home because no other workstation is available.
2. The Core of Your Work Takes Place in Your Work Room: Unlimited Deduction
If the core of your work takes place in your work room at home, you can deduct your expenses in full.
This applies, for example, to these occupations:
- Home workers
- Freelance journalists
- Graphic designers
Tax Tip: The Maximum Deductible Amount Applies per Person
A married couple of teachers won a lawsuit against the Baden-Württemberg tax court after being refused a tax deduction of 1,250 per person even though both spouses met the requirements for deducting their joint work room including using and paying for the room in equal shares. The tax court initially rejected the claim but then had to allow it in the end. A 2016 Federal Court of Finance (BFH) ruling determined that § 4 Paragraph 5 of the Income Tax Law (EStG) states that the maximum deductible amount is now person-related instead of object-related (file numbers VI R 53/12 and VI R 84/13).
Which Expenses Can I Deduct?
Certain expenses need to be deducted in proportionate amounts, so you will need to gather your annual utility bills and calculate the costs for your work room. Let’s say you live in a 100m² apartment and your home office takes up 15m², then you can deduct 15% of the following expenses:
1. Room (proportionate costs)
- Rent (for real estate owners the depreciation for the building and debt interest for loans)
- Loan interest
- Energy and water costs
- Repairs and maintenance
- Cleaning costs
- Insurance premiums (e.g. building or household insurance)
- Garbage collection
- Heating maintenance
- Property tax
- Contributions to the tenants’ association
- Chimney sweep
2. Equipment (full costs)
Deductible costs include renovation and refurbishment costs as well as expenses for flooring, wallpaper, carpets, window curtains, drapes, and lamps. Please note: Office furniture and equipment are not considered expenses for a home office. However, you can still deduct them as work-related equipment (Arbeitsmittel) for tax purposes (see below).
Tax tip: If you relocate because you can set up a home office in the new apartment, the relocation costs are deductible as income-related expenses. This also applies even if your commute is not shortened by the relocation. This is a verdict by the Hamburg Finance Court (Finanzgericht).
Being Reviewed by the Tax Office
When you declare a work room in your tax return for the first time, the tax office (Finanzamt) will send you a questionnaire to gather information about the core of your professional activities. If the core of your work doesn’t take place in your work room, you must explain why it is still necessary for certain professional tasks. That’s how the tax office determines whether the limited or unlimited deduction applies to you. Furthermore, you must explain who uses the work room and for what purposes, how it is integrated into your apartment, who else lives with you, and what room/equipment costs you would like to deduct. Visits from the tax office to verify your details are rare and typically announced in advance.
The Regulation for a Home Office as of 2023
The tax changes in 2023 also include adjustments to the home office and the Home Office Lump Sum: the Home Office Lump Sum, introduced in 2020 due to the pandemic, has been made permanent, increased, and expanded in its application. This is intended to overall simplify and reduce bureaucracy in the realm of home office work.
Unlimited Deduction for the Home Office as the Core of Professional Activities Remains
The strict requirements for deducting a work room in your home have not changed. However, from 2023, the limited deduction will be eliminated. Only the home office as the center of all professional and business activities is deductible, still at full amount or, and this is new: with an annual lump sum of 1,260 euros. You don’t need to provide proof for this. However, for each month in which you do not meet the requirements, you must deduct 1/12 from this lump sum.
For many taxpayers, the actual expenses for their home office exceed this lump sum. They benefit more from the unlimited deduction for which they need to provide proof for expenses.
What About the Former Limited Deduction?
As of 2023, the Home Office Lump Sum will become a daily lump sum for everybody working from home. You can claim it for each workday that you work predominantly (more than 50% of your working time) from home, regardless of whether you have a tax-deductible work room or just a work corner in your living room.
Additionally, as of the tax year 2023, the Home Office Lump Sum will be increased. You can now deduct 6 euros per home office day for up to 210 days per year (previously 120 days). In total, you can claim up to 1,260 euros per year.
New: If, for specific tasks, you permanently do not have access to a workstation in your company, you can still claim the lump sum even if you did not predominantly work from home that day, but also worked in the office or at the company. You can also claim up to 1,260 euros in this scenario. This is particularly relevant for example for teachers who teach at school on a given calendar day and then prepare and follow up on lessons at home.
For more information you can read our article: This is How the Home Office Lump Sum Works
Tax Tip: You Can Deduct Your Work Equipment Even Without a Home Office
Equipment used exclusively for work can still be deducted as income-related expenses (Werbungskosten) even if the tax office doesn’t recognise your home office. Self-employed persons can claim their equipment as business expenses (Betriebskosten). It doesn’t matter where they are located in your home, but if you also use the equipment privately, you must split the costs and only deduct the professional portion. If you use the work equipment for more than 90% for professional activities, you can deduct it in full.
Some examples of work equipment are:
- Work clothes
- Professional literature
- User software
- Office furniture
- Office supplies
Work equipment purchases up to 800 euros net (952 euros including sales tax) are fully deductible in the year of purchase. For more expensive purchases, depreciation over the “useful life” (Nutzungsdauer) of the item must be calculated and taken into account. The Federal Ministry of Finance (BMF) provides information and values for each work equipment in the AfA-Table (“Absetzung für Abnutzung”). Please ensure you keep all invoices and receipts!
Please note: The Federal Ministry of Finance (Bundesfinanzministerium / BMF) has reduced the useful life (Nutzungsdauer) of a computer and its associated software from the previous 3 years to now 1 year as of January 1st, 2021. This means that you can deduct the full cost** of a new computer used for professional purposes in the **year of purchase**.
Tax tip: In addition to the purchases, you can deduct repair, cleaning, and maintenance costs for your equipment!