When are relocation costs recognised despite a small reduction in travel time?

The Cologne Tax Court has issued a remarkable ruling in favour of taxpayers. Although the required travel time saving of at least 1 hour was not achieved, the relocation costs were recognised as business expenses. Relocation costs are tax-deductible if there are professional reasons, such as a change of employer, a transfer, or the occupation or vacating of a company flat.

But did you know that a move can be professionally motivated even if the travel time saving is less than one hour? This is the case if the move leads to a "significant improvement in working conditions".

In the case in question, the workplace was reached on foot in less than 5 minutes after the move. The professional reason was that the accessibility of the workplace without transport led to a significant improvement in working conditions (Cologne Tax Court, 24.2.2016, 3 K 3502/13).

Other factors, such as the elimination of time pressure and stress, played a role. The more convenient handling of transporting heavy luggage was also taken into account. The tax judges emphasised that the private motive of acquiring property is not called into question by the professional reason.

Are you looking for a closer flat to save time and stress on your commute? Even the expenses for the search, if unsuccessful, can sometimes be claimed as (unsuccessful) relocation costs, provided that a daily travel time saving of at least one hour was to be expected (Düsseldorf Tax Court, 24.3.1994, EFG 1994 p. 652).

The Hamburg Tax Court also ruled that relocation costs can be professionally motivated if the move leads to a significant easing of working conditions, without any travel time saving or change of workplace. This can be the case, for example, if a move is made to set up a home office for each spouse (Hamburg Tax Court, judgement of 23.02.2023, 5 K 190/22, appeal VI R 3/23).

When are relocation costs recognised despite a small reduction in travel time?

When can I claim relocation expenses as income-related expenses?

If your move is work-related, you can deduct the resulting costs as income-related expenses. A work-related reason is given in the following cases:

• Your employer relocates.
• You move because you have changed employers.
• Your employer has transferred you.
• You significantly reduce the distance between your home and workplace by moving. The daily travel time should be reduced by at least one hour.
• You move into or out of a company flat.
• You move to the place of work to end a second household.

The Hamburg Fiscal Court recently ruled that moving costs can also be considered work-related if the move leads to a significant improvement in working conditions, without a reduction in travel time or a change of job. This relief can be particularly applicable for the year 2020, which was affected by the COVID-19 pandemic. A move is considered work-related if it is to set up separate workrooms for both spouses in the new home, allowing them to work undisturbed from home. (Judgment of the Hamburg Fiscal Court, 23.02.2023, Case No: 5 K 190/22, Revision VI R 3/23).

When can I claim relocation expenses as income-related expenses?

What relocation expenses can I deduct?

If your move is work-related, you can claim the following expenses as income-related expenses:

Transport costs

• This includes your expenses for a moving company in full for all moving goods. Fees for no-parking signs at the loading or unloading location can also be deducted as transport costs.
• If you move without a freight forwarder, you can deduct the costs for a rental vehicle including mileage allowance, expenses for using your own vehicle at the travel expense rate, and the cost of packaging materials. If you pay wages to friends who help, you can also deduct these expenses.

Travel expenses

• On the moving day, you can claim travel expenses as for an external activity. If you travel by your own vehicle, you can apply the business travel allowance of 30 cents per kilometre. If you use public transport, the tax office accepts the actual costs incurred with proof.
• During the move, you can also claim meal allowances for yourself and your household members moving with you at the rates for external activities as moving expenses. If you can prove accommodation costs incurred from the days of loading to unloading the moving goods, you can also deduct these.

Double rent payments

• If you have to pay double rent due to the notice period of your old rental apartment, even though you already live in the new apartment, you can deduct the rent payments for the old apartment as income-related expenses from the day you move out until the end of the rental period.
• This also applies to additional costs. If you have already rented the new apartment but are not yet living in it, you can deduct the rent payments for the new apartment as income-related expenses.

Furnishings

• Expenses previously covered by allowances for a cooker or stoves for each room of a flat are included in the newly adjusted allowance for other moving expenses (§ 10 BUKG) from 1.6.2020 and are therefore no longer listed separately. In particular, the abolition of allowances for heating stoves is appropriate, as stove heating is outdated and no longer relevant in practice.

Relocation-related tutoring

• If your children need to change schools and tutoring is required, you can deduct the costs.

  

Moving expense allowance for "other moving expenses"

• In addition to these actual costs, there is a moving expense allowance (lump sum for other moving expenses) for which no receipts are required. A table and detailed explanation are provided in the following section.

What relocation expenses can I deduct?

What costs are covered by the relocation allowance?

If you move for work-related reasons, you can deduct the moving expenses as income-related expenses or have them reimbursed tax-free by your employer. These include transport costs, travel expenses, double rent payments, and estate agent fees for a rental property, as well as other moving expenses.

While the aforementioned costs can be deducted in the amount proven, other moving expenses can be claimed with a flat rate - the so-called flat rate for other moving expenses, also known as the moving expense allowance.

The Federal Ministry of Finance has recently increased the moving expense allowances for work-related moves as of 1 March 2024 (BMF letter dated 28 December 2023).

The moving allowance covers

• Tips for the removal men and other helpers. This also includes, for example, inviting your friends to a meal as a thank you for their help with the move.
• Professional assembly and disassembly of lights, fitted kitchens, and other electrical appliances.
• Professional installation and alteration of curtains, blinds, and their fittings.
• Fees for re-registration.
• Advertisements for house hunting, etc.
• Costs for cosmetic repairs in the old flat, provided you are contractually obliged to cover them (but not cosmetic repairs in the new flat, as these are privately incurred).

What costs are covered by the relocation allowance?

Can tutoring for your own children be deducted after a move?

If children require tutoring after a work-related move, the costs can be deducted as income-related expenses up to a maximum amount.

The tax office does not automatically recognise your proven expenses up to this maximum amount.

Until 31/05/2020, the following regulation applies: Your tuition costs are initially fully recognised up to half of the maximum amount and beyond that at 75%, until the second half of the maximum amount is exhausted. However, the maximum amount must not be exceeded in total.

The Maier family moved from Hamburg to Berlin on 15/01/2020. Additional tuition costs of 1.500 Euro were incurred for their daughter. Initially, 1.022,50 Euro, i.e. half of 2.045 Euro, are deductible. Of the remaining amount of 477,50 Euro (1.500 Euro minus 1.022,50 Euro), a further 358 Euro can be deducted (75 percent of 477,50 Euro).

In total, the Maier family can claim tuition costs of 1.380 Euro in the income tax return.

Currently, for moves from 01/06/2020, the tax deductibility of tuition costs is newly regulated (due to the "Act on the Modernisation of the Civil Service Remuneration Structures" of 09/12/2019). As before, the deductible maximum amount is announced by the Federal Ministry of Finance and adjusted from time to time.

Currently, the Federal Ministry of Finance has increased the allowances and maximum amounts for work-related moves from 1 March 2024 (BMF letter dated 28/12/2023).

The necessity must be proven in an appropriate manner, e.g. by a certificate from the school. New is that the necessity is now assumed to be given in the case of a move-related change of federal state. The reason for the regulation is the different teaching and framework plans of the previous school compared to those of the new school.

Tax tip: You should be aware of the following detail: In the past, the day you completed the move was decisive. If the furniture was loaded on 28/02 and unloaded on 01/03, you were entitled to the higher amounts. This is now different: For the calculation of the allowances, the day before the removal goods are loaded is decisive (BMF letter dated 20/05/2020).

Can tutoring for your own children be deducted after a move?