What conditions must I meet to deduct the costs of a second household?
If your place of work is far from your home and you therefore need to take a second home, this constitutes a dual household. Certain costs incurred as a result can be deducted from your taxes.
However, certain conditions must be met: Firstly, you must have a main home with your own household at your place of residence. You must also take a second home at your place of work for professional reasons. A new condition for "own household" since 2014 is the financial contribution to living expenses.
Professional reasons exist, for example, if you have been transferred to an external place of work or if you take up a job that is far away from your own home. The dual household is also considered to be for professional reasons if you move your main residence away from your workplace for private reasons and use a flat at your place of work as a second household.
Any accommodation where you have the possibility to stay overnight is recognised as a second home. How often you use this possibility is irrelevant. Accommodations can include:
- a rented flat,
- your own house,
- a hotel room,
- overnight stays with friends, or
- a barrack on a construction site.
If you drive home several times a week, you can choose whether to deduct costs for dual household or travel expenses for all home trips. In the second case, travel expenses can be deducted using the distance allowance. However, you cannot then deduct overnight costs and meal allowances as business expenses in the first three months. The second option is advisable if you frequently travel home and have low overnight costs at your second home.
(2023): What conditions must I meet to deduct the costs of a second household?
What can I deduct for second homes?
The tax office does not impose strict requirements on the employee's second home at the place of work. This can be a flat, a hotel room, or a furnished room. The frequency of use does not matter; the accommodation must simply be available. However, the second home must not become the new main residence, as this would end the tax benefits. If these conditions are met, various work-related expenses incurred due to maintaining a second household can be claimed for tax purposes.
This starts with the search for accommodation. Expenses incurred during the search, such as travel costs for viewing properties, telephone or postage fees, can be deducted as work-related expenses. The tax office also recognises moving costs. These include transport costs for a removal company or rental vehicle and travel expenses on the moving day.
In the first three months of maintaining a second household, meal allowances can even be claimed. The amount of the allowances depends on the duration of absence from the main residence. They are:
- 24 hours: 28 Euro
- 8 to 24 hours: 14 Euro
For travel expenses, the first journey there and the last journey back are fully recognised, to be proven, e.g. by ticket. Alternatively, if a car is used, the general mileage allowance of 30 cents per kilometre can be applied. Weekly trips home, on the other hand, are recognised with the distance allowance of 0.30 Euro per kilometre (or 0.38 Euro from the 21st km).
Accommodation costs or the costs of the second home can also be deducted as work-related expenses. Only proven costs, no flat rates, are recognised.
Since 2014, the deductible amount in Germany has been limited to a maximum of 1.000 Euro per month. This maximum amount includes all expenses for the accommodation or flat that are borne by the employee, in particular:
- Rent including service charges, also for a furnished flat,
- Purchase costs for necessary household and furnishing items,
- Second home tax,
- Renovation, etc.
The maximum amount of 1.000 Euro applies monthly and as an average value for the entire year. If the expenses are less than 1.000 Euro in some months and more than 1.000 Euro in other months, the excess amounts may be offset against the unused maximum amounts.
The Federal Fiscal Court has recently ruled against the tax authorities that the costs for the necessary furnishing of the second home in the context of a work-related second household do not count as accommodation costs, the deduction of which is limited to 1.000 Euro per month. Rather, expenses for furnishings and household items - insofar as they are necessary - are fully deductible as other necessary additional expenses due to maintaining a second household in accordance with § 9 para. 1 sentence 3 no. 5 EStG (BFH ruling of 4.4.2019, VI R 18/17).
- According to the BFH, expenses for furnishings and household items are not covered by the maximum amount, as these are incurred only for their use and not for the use of the accommodation. The use of the furnishings is not the same as the use of the accommodation itself. The legislative aim of the new regulation was to limit only the costs for the accommodation to 1.000 Euro per month, not other necessary expenses.
- The maximum deductible amount of 1.000 Euro per month includes, according to the legislative justification, "all expenses incurred for the accommodation or flat, e.g. rent including service charges, rental or lease fees for parking spaces, also in underground garages, expenses for special use (such as garden, etc.) borne by the employee". The amount of 1.000 Euro is based "on a flat of approximately 60 sqm, which has always been used by the courts as a reference, depending on location and equipment".
Tip: If the second home is owned by the employee, the actual expenses, e.g. depreciation, interest on loans, service charges, repair costs, can be deducted as work-related expenses up to the maximum amount of 1.000 Euro per month. Here too, the costs for necessary furnishings and household items can be deducted in addition to the maximum amount (BMF letter of 24.10.2014, BStBl. 2014 I p. 1412, para. 103).
Tip: When using a furnished or partly furnished flat, a higher rent is generally payable. If the rental contract does not specify a breakdown of the rent for the use of the flat and the use of the furniture - as is usually the case - the rent paid can be apportioned by estimation according to § 162 AO. The use of the flat is then deductible up to 1.000 Euro per month, and the use of the furniture is deductible beyond that (BFH ruling of 4.4.2019, VI R 18/17).
Tip: The Saarland tax court has recently ruled that the costs for a rented parking space or garage do not count as accommodation costs and are therefore not subject to the 1.000 Euro limit. They can therefore also be deducted if the rent for the flat is already so high that the limit is exceeded (court order of 20.5.2020, 2 K 1251/17).
Currently, the tax authorities have announced a welcome simplification rule: If the purchase costs for the furnishings and equipment of the second home - excluding work equipment - do not exceed 5.000 Euro including VAT in total, it is assumed for simplification purposes that these costs are considered "necessary" or not excessive and are recognised as work-related expenses without further examination (BMF letter of 25.11.2020, BStBl 2020 I p. 1228, para. 108).
Tip: The Munich tax court has recently ruled against the tax authorities that expenses for the second home tax do not count as accommodation costs, which can be recognised as work-related expenses up to a maximum of 1.000 Euro per month. Rather, the second home tax can be recognised additionally as "other expenses" in the context of maintaining a second household (FG Munich of 26.11.2021, 8 K 2143/21).
Tip: In the case of a second household in Germany, the actual expenses for the accommodation are only deductible up to the maximum amount of 1.000 Euro per month (§ 9 para. 1 no. 5 EStG). The question is whether costs for energy, i.e. for electricity, heating, and hot water, are also subject to the 1.000 Euro limit. The question is not entirely clear. However, the Mecklenburg-Vorpommern tax court has issued a legally binding ruling stating (judgment of 21.9.2022, 3 K 48/22): "It therefore appears appropriate and in line with the purpose of the law to include only those costs in the 'accommodation costs' that are usually included in the calculation of an average gross cold rent and are therefore also covered by the flat rate of 1.000 Euro, which is intended to replace the calculation of the average rent. These are the monthly amounts for water, sewage, street cleaning, refuse collection, house cleaning and lighting, chimney cleaning, caretaker, public charges, building insurance, and cable connection. Surcharges for central heating, hot water supply, subletting, and furniture are not included in the gross cold rent (Federal Statistical Office, http://www.destatis.de/Themen/Gesellschaft und Umwelt/Einkommen, Konsum und Lebensbedingungen/Bruttokaltmiete)." Conclusion: According to the Mecklenburg-Vorpommern tax court, the costs for heating and hot water in the case of a second household are deductible without limit (the tax court unfortunately does not explicitly comment on electricity costs, except for house lighting costs). However, it is questionable whether the tax authorities and the BFH share the view of the Mecklenburg-Vorpommern tax court.
(2023): What can I deduct for second homes?
When do I have my own household?
For the tax recognition of maintaining a second household in Germany, certain conditions must be met:
- You must have your own household at your place of origin and your main place of residence must be there. Your own household means that you own or rent a property that you use for your personal needs.
- For single individuals, it is important to contribute financially to the main household. This means you must cover more than ten percent of the monthly running costs of the household. The financial contribution to the living costs in the main residence is usually strictly checked (§ 9 Abs. 1 Nr. 5 EStG).
- Married individuals often have less difficulty claiming a second household. Usually, the family continues to live at their place of origin and uses their own self-contained flat. The financial contribution is rarely questioned in these cases.
In 2019, the Finance Court in Lower Saxony ruled that the financial contribution to the main household - in this case, the parental household - can be made in various ways. This can be through direct payments to the parents or indirectly through the purchase of household items, repair or renovation costs, or contributions to acquisition or construction costs. Regular payments are not mandatory, and one-off payments are accepted.
Recently, the Federal Finance Court confirmed this ruling and rejected the strict requirements of the tax authorities.
A case study:
An employee rented a flat at the place of work but also lived in a non-self-contained room in his parents' house. He stated that he contributed a total of 3,160.47 Euro to the household costs in 2015. This included grocery shopping and payments for utility costs and new windows. The tax office did not accept this as sufficient proof of financial contribution, rejected the deduction of costs for the second household, and the employee had to go to court. The court ruled in favour of the employee, and the judgement was upheld.
Reasoning:
To prove your own household, you must contribute financially to the costs of the main household. This includes costs such as rent, operating costs, household items, renovations, and other living expenses. Other expenses such as clothing, holidays, or leisure activities are not included.
There is no fixed minimum limit for the financial contribution, and it does not have to be made monthly. One-off payments, even at the end of the year, are accepted. However, the financial contribution should not be insufficient.
To assess the sufficient financial contribution, the actual costs of the household and living expenses in the year are used. These must be proven. Regular fixed costs can be more easily proven, while variable costs such as groceries can be based on experience values.
The amount of the sufficient financial contribution depends on individual circumstances.
Tips:
- If the tax office rejects the second household due to a lack of cost sharing, you can appeal and refer to the Federal Finance Court's decision. Monthly transfers can avoid conflicts.
- Adhere to the ten percent limit of the tax authorities by covering more than ten percent of the monthly regular running costs of the household to avoid problems.
- Note that the Federal Finance Court's ruling is not transferable to cases where younger children go home at weekends and only use their childhood room.
(2023): When do I have my own household?
