Increasingly modern communication technologies have made working from home more popular in recent years. Added to this last year was the Corona pandemic, which intensified this development, albeit not entirely voluntarily. For this reason, it is important for taxpayers to know the deduction options for a home office study.
Criteria for a Home Office Study
According to the BFH, a home office study must meet the following principles (XI R 89/00, BStBl II 2003, 185):
- A room which, by its location, function and furnishings, is integrated into the domestic sphere of the person working (e.g. as part of the private residence)
- Predominantly used for intellectual, written, administrative or organisational work
- Almost exclusively used for business purposes (more than 90%)
- The home office study must be separated from the rest of the residence by a door and walls (curtains are not sufficient) – VIII R 10/12, BStBl II 2016, 881
It is important to note that all criteria must be met; otherwise the tax office will not recognise the room as a home office study. Consequently, a deduction of costs would not be permitted.
In addition, the following criteria are considered detrimental to a home office study:
- Walk-through room
- Private items (e.g. television, piano, wardrobe, private literature, etc.)
However, the following are permitted: couch, folding bed, etc. - "Work corner" (e.g. living room, due to predominantly private use)
Deduction options for the home office study
- Full deduction of the home office study
For a full deduction of the incurred costs, the home office study must additionally constitute the centre of the entire business and professional activity (cf. § 4 Abs. 5 Nr. 6b S. 3 EStG). A centre of business and professional activity exists if the qualitative characteristics are met, i.e. the taxpayer performs in the home office study those actions and services that are formative for the profession. The time spent in the home office study plays only a subordinate role. An exception applies, however, if two qualitatively equivalent workplaces (home office study and external work location) are available. In this specific case, the quantitative consideration plays an important role, so that a centre of activity can be assumed if more than half of the working time is spent in the home office study. An example of this would be a software developer who works three days a week in the home office study and travels to their software company two days a week. A centre of activity is categorically ruled out for teachers, sales representatives, architects and judges.
- Limited deduction of home office study up to €1,250
A limited deduction is possible if no other workplace is available to the taxpayer. In this case, a deduction of up to €1,250 per year is permitted. It is important to note that this is not a flat-rate amount; only the actual costs can be deducted. During the Corona pandemic (01/03/2020 – 31/12/2021), it was additionally stipulated that if an employee worked from home on the recommendation of the federal government, no other workplace was available either. Accordingly, a deduction of €1,250 would be possible.
Home Office Flat Rate
The home office flat rate was introduced for the period of the Corona pandemic (01/01/2020 – 31/12/2020) and is intended to benefit every taxpayer (§ 4 Abs. 5 Nr. 6b S. 4 EStG). For this reason, its use is permitted even without a home office study. Taxpayers can claim €5 per day in the home office (max. 120 days or €600). However, the home office flat rate is subject to the condition that no deduction has been made under sentences 2 and 3 of § 4 Abs. 5 Nr. 6b (full deduction or partial deduction up to €1,250).
Which costs are deductible?
Deductible costs of the home office study include:
- Rent (if a rented apartment)
- Utilities (e.g. electricity, water, gas)
- Cleaning costs (e.g. cleaning service)
- Insurance (household contents insurance, building insurance)
- Waste disposal and chimney sweep fees
- Property tax
- Building depreciation (if the house is owned)
- Interest on loans for house financing or repairs
When deducting the costs mentioned, the study must be in relation to the entire residence, so that the costs can only be deducted proportionally according to the square metres of the study. A full deduction is possible for room costs which exclusively relate to the home office study. Examples would be wallpaper, carpets, window curtains, etc. Work equipment acquired by the taxpayer does not fall under deductible room costs. These can be fully deducted within the low-value asset (GWG) threshold (€800) or, above the GWG threshold, depreciated over the useful life.
Frequently asked questions
Frequently asked questions
What criteria must a home office meet for tax purposes?
The home office must be integrated into the domestic sphere, used primarily for intellectual, written, or organizational work, and used at least 90% for business purposes. It must be separated from the rest of the living area by a door and walls — curtains are not sufficient (BFH VIII R 10/12). A 'work corner' in the living room or a walk-through room is not recognized, nor is a room containing private items such as a television or wardrobe.
When is a full cost deduction for a home office possible?
An unlimited deduction is permitted if the home office constitutes the center of all business and professional activity (§ 4 Abs. 5 Nr. 6b S. 3 EStG). The decisive factors are qualitative: whether the activities that define the profession are carried out there. Where two workplaces are qualitatively equivalent, it depends on whether more than half of the working time is spent in the home office. For teachers, sales representatives, architects, and judges, a center of activity in the home office is ruled out.
When does the limited deduction of up to €1,250 for a home office apply?
The limited deduction of up to €1,250 per year is available if no other workplace is available to the taxpayer. This is not a flat rate; only actual expenses incurred can be claimed, up to this maximum amount. During the COVID-19 pandemic (01.03.2020–31.12.2021), working from home on the recommendation of the federal government was deemed a case in which no other workplace was available.
How does the home office flat rate work and who is eligible?
The home office flat rate under § 4 Abs. 5 Nr. 6b sentence 4 EStG allows 5 € per home office day, capped at 120 days or 600 € per year. It is available to every taxpayer, even without a recognised home study. The condition is that no full or partial deduction under § 4 Abs. 5 Nr. 6b sentences 2 and 3 EStG has already been claimed.
Which costs for a home office are deductible and how are they allocated?
Deductible on a pro rata basis are rent, utilities (electricity, water, gas), cleaning costs, insurance, waste disposal, chimney sweep fees, property tax, building depreciation (AfA), and financing interest. The allocation is based on the ratio of the home office's square meters to the total living area. Costs that exclusively relate to the home office (e.g. wallpaper, carpets, curtains) are fully deductible. Work equipment is not part of the room costs and is either written off immediately up to EUR 800 (low-value assets) or depreciated over its useful life if above this threshold.