When are training costs deductible as special expenses and when as income-related expenses?

A distinction is made between training and further training costs as follows:

(1) Training costs are only the expenses for the first vocational training and for a first degree as initial training. You can deduct these costs as special expenses, but only up to a maximum amount of 6,000 Euro.

(2) Further training costs are costs for all educational measures undertaken after the first vocational training or after the completion of the first degree. This also includes retraining for a different profession, educational measures in the current profession, further training in a non-practised profession, or a second degree. You can fully deduct such costs as income-related expenses. However, it is important that the expenses are related to the profession and that you intend to use the further training to generate income.

(3) First or second degree? You can only deduct the costs for the first degree as special expenses to a limited extent. For a second degree, however, the costs are always fully deductible as income-related expenses - provided that income is also to be generated. The second degree must not be pursued as a hobby, as some pensioners do, for example.

You can only claim special expenses in the year of payment. So if you are a student with no taxable income, you will not benefit from a deduction for special expenses. However, if you claim the training costs as income-related expenses, you can carry this financial loss forward to your first year of employment in which you earn income. You must then claim your expenses as anticipated income-related expenses.

Mr A and Ms B are students. Mr A has already completed a degree, Ms B has not. Both have no taxable income in the relevant year, but 4,500 Euro in training costs. In the following year, both have similarly paid jobs.

As Ms B is undertaking a first degree, she can only claim the costs as special expenses in the year they are incurred. Without taxable income in that year, she has no tax advantage.

Mr A has completed a second degree. He can declare the training costs in a tax return for the relevant year as income-related expenses and thus incurs a loss. He can also claim this loss in the year after his studies when he has taxable income.

In the first year after his studies, Mr A therefore pays less tax than Ms B, assuming the same salary.

When are training costs deductible as special expenses and when as income-related expenses?

Study costs: When are they tax deductible?

Expenses for a first degree after school or for initial vocational training outside of an employment-based training programme are only deductible as special expenses up to 6,000 Euro (§ 10 para. 1 no. 7 and § 9 para. 6 EStG). This limitation is constitutional. In other cases, study costs can be deducted without limit as business expenses or, for the self-employed, as operating expenses, for example in the case of a second degree or job-related training after initial training.

In the following cases, study costs are deductible as business expenses without limit:

• First degree after completed vocational training: For example, a degree after an apprenticeship (BFH ruling of 18.6.2009, BStBl. 2010 II p. 816).
• First degree as part of an employment-based training programme: For example, for officers, career soldiers or in dual study programmes.
• Second degree: After completing a first degree, if the degree is job-related.
• Master's degree: As it requires a completed Bachelor's or other degree, it is considered a second degree.
• Doctorate: The costs of a doctorate are deductible as business expenses if they are job-related.
• MBA: An MBA is also a second degree and the costs are fully deductible.
• Parallel degree courses: If a second degree course is continued after completing the first, the costs of the second degree are considered business expenses.
• Referendariat: For lawyers and trainee teachers, expenses after the first state examination are fully deductible.

Special case: Change of course without graduation: If a student changes course without completing the first degree, for example from law to medicine, the new course is not a second degree. In this case, expenses can only be deducted up to 6,000 Euro as special expenses.

Study costs: When are they tax deductible?

First degree: What are the chances of a full deduction for income-related expenses?

Expenses for the first vocational training and for the first degree as initial training, which are not completed as part of a training employment relationship (e.g. apprenticeship), are currently only deductible as special expenses up to a limit of 6,000 Euro, while the costs for any educational measures after completing vocational training, including a first degree after an apprenticeship, can be fully considered as business expenses (§ 4 para. 9, § 9 para. 6, § 10 para. 1 no. 7 and § 12 no. 5 EStG).

The Federal Constitutional Court has now ruled: The current legal regulation is constitutional. The fact that expenses for initial vocational training or for a first degree as initial training cannot be deducted as business expenses does not violate the Basic Law (BVerfG decision of 19.11.2019, 2 BvL 22/14, 2 BvL 23/14, 2 BvL 24/14, 2 BvL 25/14, 2 BvL 26/14, 2 BvL 27/14, published on 10.1.2020).

First degree: What are the chances of a full deduction for income-related expenses?

Training costs deductible as business expenses after all?

According to the Federal Fiscal Court, training costs should be deductible as business expenses without limit. Training costs are incurred as a necessary prerequisite for subsequent employment and are therefore business expenses, as they serve to generate taxable income.

Thus, the BFH judges asked the Federal Constitutional Court to clarify whether it is compatible with the Basic Law that, according to § 9 para. 6 EStG, expenses for initial vocational training or for a first degree are not recognised as business expenses (BFH decision of 17.7.2014, VI R 8/12 and VI R 2/12).

Currently, however, the Federal Constitutional Court has finally clarified the highly controversial issue - after more than 5 years(!) - unfortunately to the great disappointment of all those affected and to the delight of the tax authorities: 

The current legal regulation is constitutional. The fact that expenses for initial vocational training or for a first degree cannot be deducted as business expenses does not violate the Basic Law. The constitutional judges thus contradict the highest financial judges! (BVerfG decision of 19.11.2019, 2 BvL 22/14, 2 BvL 23/14, 2 BvL 24/14, 2 BvL 25/14, 2 BvL 26/14, 2 BvL 27/14, published on 10.1.2020).

Training costs deductible as business expenses after all?

Au pair stay: Language lessons count as vocational training

Many school leavers are drawn abroad for a period after their A-levels. As an au pair, they aim to improve their language skills through language classes and get to know the country and its people. In return for free board and lodging, the host family expects help with childcare and household duties. During the stay abroad, parents are only entitled to child benefit or tax allowances if the au pair stay is considered vocational training.

How can an au pair stay be recognised as vocational training? It is necessary for the child to participate in theoretical and systematic language classes that amount to at least 10 hours per week.

Does it have to be exactly 10 hours per week, or might 8.6 hours per week be sufficient?

In addition to pure language classes, the au pair must also spend time on preparation and follow-up work.

Currently, the Federal Fiscal Court has ruled that language classes of only 8.6 hours per week are not sufficient. Therefore, the au pair stay abroad cannot be recognised as vocational training. In this case, neither child benefit nor child allowances were granted. "If the average is less than 10 hours per week, exceptionally individual months may still be considered as vocational training if they are characterised by intensive classes of significantly more than 10 hours, e.g. due to block classes or courses" (BFH decision of 14.6.2016, III B 132/15).

Exceptionally, language classes of less than 10 hours per week may be sufficient for recognition as vocational training. This is the case if the foreign language classes are a mandatory requirement in a training or examination regulation or if the language classes prepare for a recognised foreign language test. The two most important English language tests are TOEFL (Test of English as a Foreign Language) or IELTS (International English Language Testing System). (BFH ruling of 15.3.2012, III R 58/08; BFH ruling of 26.10.2012, VI R 102/10).

TOEFL language tests count as vocational training

Currently, the Saarland Fiscal Court has confirmed that an au pair stay after passing the TOEFL language test can be considered vocational training. However, one condition was particularly emphasised: Even if the acquisition of language skills is verified by a language test - such as TOEFL or IELTS - there must still be a concrete connection to vocational training. It is important that studies or other training are commenced or continued immediately (FG Saarland of 2.2.2014, 2 K 1308/13, final).

Au pair stay: Language lessons count as vocational training

How does a home office affect taxes during training?

If you are in training or studying and use a home office, you should consider the following tax aspects:

1. Deduction of costs

In exceptional cases, you can deduct the costs for your home office. This includes rent, utilities, and cleaning costs. Alternatively, you are entitled to an annual allowance of 1,260 Euro. Please note the applicable conditions.

2. Centre of activity

Cost deduction is only possible if the home office is the main location of your professional or educational activities. It must be a separate room; a workspace in a corner is not sufficient.

3. Daily allowance

If the home office is not the centre of your activity, you can instead claim a daily allowance of 6 Euro per day for a maximum of 210 days per year. It does not matter whether you work at a desk or, for example, at the kitchen table.

4. Work equipment

The costs for work equipment, such as a computer or desk, are not included in the home office costs and can be claimed additionally as business expenses. This also applies to training costs, costs for a training employment relationship, or initial studies.

5. Use for income

If you also use the home office for income-generating activities and it is the main location of your work, you must allocate the costs according to usage. However, it is also possible to allocate all costs to one activity.

These are the essential tax basics that you as a trainee or student should consider regarding the deductibility of a home office.

How does a home office affect taxes during training?

When are pilot training costs deductible?

The costs of pilot training are only fully deductible as anticipated income-related expenses if a "proper" initial training has been completed beforehand. According to the legal situation from 2015, initial training is only considered "proper" if it lasts at least twelve months full-time and ends with an examination. Only after such initial training can the costs for further training be claimed in full as income-related expenses (§ 9 para. 6 EStG 2015).

Shorter training courses are considered "vocational preparation measures" or "training phases" and not as initial training. However, the costs of such training phases are deductible as special expenses up to 6,000 Euro (§ 10 para. 1 no. 7 EStG).

The Federal Fiscal Court recently ruled that the costs of pilot training without prior initial training are not deductible as income-related expenses, even if the taxpayer had previously worked in another profession for many years. Long-term employment does not replace "proper" initial training, and the costs of pilot training can only be partially deducted as special expenses (BFH ruling of 15.2.2023, VI R 22/21).

Example: A pilot obtained the instrument rating for aircraft in 2016 and the type rating for the Airbus A320 in 2017, but had not previously completed proper initial training. The tax office recognised the costs of pilot training only as special expenses.

According to the judges, the 20-month internship did not meet the requirements for initial training, as there was no structured training and no final examination. The several years of commercial activity before the pilot training were also not considered initial training.

The classification of the costs of professional pilot training as retraining costs, which would be deductible under § 9 para. 1 sentence 1 EStG, was also rejected. This would contradict the aim of limiting the deduction of income-related expenses.

There is no objective reason why longer employment as a taxi driver or ski instructor should exclude the deduction of income-related expenses, while several years of employment as a DJ/musician should not prevent this (see BT-Drucksache 18/3017, p. 43).

When are pilot training costs deductible?

How can I deduct training costs as special expenses?

Expenses for initial vocational training can be deducted as special expenses up to a maximum amount of 6,000 Euro. This means these costs reduce your taxable income and therefore your tax burden. You may receive a refund of the tax you paid in advance during the year, or a possible additional payment may be reduced.

However, if your training takes place as part of a training employment relationship, such as an apprenticeship or traineeship, a different rule applies: In this case, you can deduct the costs in full as income-related expenses because the income from the training relationship is taxable. The costs are also deductible as income-related expenses if the training is your second vocational training, i.e. you have already completed initial vocational training.

Whether an educational measure is considered further training or initial training makes a significant difference for tax purposes. For further training, expenses are deductible as income-related expenses without limit. For initial training, you can only deduct the costs to a limited extent as special expenses. If training or studies are merely for general education or a hobby, the costs are not deductible at all.

For jointly assessed spouses, it does not matter which of the two paid the costs for one spouse's training. If both spouses are in training, each can claim their expenses up to the maximum amount of 6,000 Euro. However, each partner must list their costs separately. A couple can therefore deduct a maximum of 12,000 Euro of training costs as special expenses. However, one spouse cannot transfer part of their maximum amount to the other if they do not fully use it.

How can I deduct training costs as special expenses?

What counts as vocational training?

Vocational training, the costs of which you can claim as special expenses, primarily includes initial vocational training (excluding training as part of an employment relationship, such as an apprenticeship) or a first degree. Costs for attending general education schools to obtain a secondary school certificate or A-levels are also considered training costs. Any further training after the first professional qualification is further training, which you can deduct as business expenses without limit.

"For the first time" means that no other completed vocational training or university degree preceded the training. If you are already working without a completed training and obtain such a qualification later, this is also initial vocational training, which must be entered under special expenses. Since 2015, the term "initial training" has been legally defined: Proper initial training only exists if the training lasts at least 12 months full-time and ends with an examination. Only after such initial training can the costs for further training be deducted as business expenses (§ 9 para. 6 EStG).

Not accepted as vocational training is when you undertake the educational measure solely out of interest in general education or as a hobby. For example, if you train as an instructor to teach in a sports club for money or if you take a photography course as a dental technician, this is not considered further training.

What counts as vocational training?

Which expenses for vocational training can I deduct?

Individuals undergoing vocational training can claim the following expenses as special expenses in their tax return:

• Costs for study and work materials, such as textbooks, stationery, office supplies, copies, calculators, desks, bookshelves, etc.
• Participation fees, such as course, training, study, school, admission, and examination fees
• Costs for study trips, excursions, or class trips
• Travel expenses to the training location with the distance allowance of 30 cents per kilometre or 38 cents from the 21st kilometre
• Travel to private study groups with the business travel allowance of 30 cents per kilometre
• Costs for accommodation and meals away from home if you have your own flat at the training location.
• Interest on the repayment of a student loan, in the year of payment
• Home office allowance (in a few exceptional cases, possibly the costs for a home office)
• Costs for telephone and internet if used for vocational training.

(1) If you use a computer for training, you can deduct the proportional annual depreciation. This amounts to 1/36 of the purchase costs per month. Purchase costs up to 800 Euro net can be deducted immediately.

(2) According to the Federal Ministry of Finance, the standard service life for hardware and software is generally one year (BMF letter dated 26.2.2021). This means that the purchase costs can be fully deducted as business expenses in the year of purchase. This should also apply to special expenses.

Consideration of tax-free income: If you receive tax-free income to support vocational training (e.g. BAföG), your deductible expenses will be reduced by these payments. However, this only applies to grants that do not have to be repaid. Grants for living expenses are excluded. Repayable loans do not have to be deducted from training costs.

Special feature for students in second degree programmes: Students in second degree programmes can deduct accommodation costs and additional meal expenses for a semester abroad, practical semester, or internship as deductible business expenses if these are mandatory according to the study regulations. According to a ruling by the Federal Fiscal Court (BFH, ruling of 14.5.2020, VI R 3/18), students do not establish a new first place of work at the other university.

Tip: Always try to pay training costs yourself, not your parents.

Which expenses for vocational training can I deduct?

Can I claim a deduction for my home office?

Since 1 January 2023, new regulations apply for deducting expenses for a home office and working from home. Two scenarios are distinguished:

1. Home office as the centre of activity

If the centre of your professional or business activity is in the home office, you can deduct the actual costs or a flat rate of 1,260 Euro per year. This requires a separate room used almost exclusively for work. This regulation applies to, for example, writers, translators, or IT professionals who mainly work from home.

2. Not the centre, but work from home

If the professional activity is partly carried out from home without the home office being the centre, a daily allowance of 6 Euro for a maximum of 210 days (max. 1,260 Euro per year) can be deducted. The activity can take place anywhere in the home; there are no specific requirements for the workplace.

Particularities of the home office as the centre:

• Flat rate: The annual flat rate of 1,260 Euro applies for the entire year and does not need to be proven.
• Time share: If the home office is not used for the entire year, the flat rate is reduced monthly.
• Personal: The flat rate applies per person but cannot be used multiple times for different activities.
• No combination: The combination of annual and daily flat rates for the same period is not possible.

Examples:

• Example 1: A and B share a home office. Only for A is it the centre of activity. A can deduct proportional costs, B only the daily allowance.
• Example 2: Both use the home office as the centre. Both can deduct the flat rate of 1,260 Euro.

Home office without a dedicated room

Even without a dedicated room, taxpayers can deduct an allowance for working from home from 2023:

• Home office allowance: 6 Euro per day, maximum 1,260 Euro per year.
• Conditions: A separate room is not required. The allowance applies for work in the home, regardless of the workplace (e.g. kitchen table).
• Travel costs: Travel costs to the first place of work and the allowance cannot be combined. For off-site work, travel expenses and the allowance are permitted if the work is mainly done at home.

Special regulation: No other workplace

If no other workplace is permanently available for the professional activity (e.g. for teachers), the daily allowance and travel costs to the first place of work can be deducted simultaneously.

Examples:

• Example 1: A civil engineer can deduct travel expenses and the daily allowance if the work is mainly done at home.
• Example 2: An insurance broker cannot deduct the allowance if most of the work is done outside the home.

Can I claim a deduction for my home office?

Legal situation regarding first degree and tax deduction of expenses

A first degree is when the degree is undertaken as the first professional training directly after leaving school (e.g. A-levels). In this case, study costs can only be deducted as special expenses up to a limit of 6,000 Euro per year.

However, if a first degree is undertaken after completing vocational training, the costs can be claimed as income-related expenses without limit. This regulation also applies to degree programmes considered as anticipated income-related expenses (BFH ruling of 18.6.2009, BStBl. 2010 II p. 816).

If you complete your first degree as part of a training employment (e.g. vocational academy, dual study programmes), the study costs can also be deducted as income-related expenses without limit, as the training salary is taxable.

Unlimited deductibility of income-related expenses in the first degree

In certain cases, study costs can also be deducted as income-related expenses without limit during the first degree (BMF letter of 22.9.2010, BStBl. 2010 I p. 721):

• If two or more degree programmes are started in parallel and completed differently, the second is considered a second degree after the first degree is completed, and expenses are then considered income-related expenses.
• For lawyers and trainee teachers, the first state examination counts as a professional qualification. The costs of the traineeship can then be deducted as income-related expenses without limit.
• The Bachelor's degree is also considered a professional qualification. A subsequent Master's degree is considered a second degree, and the costs can be deducted as income-related expenses without limit.

After years of uncertainty, the Federal Constitutional Court confirmed that the regulation preventing the deduction of expenses for a first degree as income-related expenses is constitutional (BVerfG decision of 19.11.2019, published on 10.1.2020).

Legal situation regarding first degree and tax deduction of expenses

Can I claim travel expenses for vocational training?

As part of vocational training, travel expenses were previously deductible - as with off-site work - with the actual costs or the business travel allowance of 30 cents per kilometre driven. The commuter allowance generally did not apply, as this is only relevant for journeys between home and "regular workplace" (until 2013). However, since 2014, for full-time educational measures outside of employment, the educational institution is considered the "first place of work". This also applies to vocational training.

This means: Travel to the educational institution is now only deductible with the commuter allowance of 30 cents per kilometre (38 cents from the 21st kilometre).

As off-site work can no longer be assumed, meal allowances and accommodation costs are no longer recognised. This applies both in the case of further training for the deduction of income-related expenses and in the case of training for the deduction of special expenses.

You can still claim travel to an educational institution outside the "first place of work" with the business travel allowance of 30 cents per kilometre driven and also deduct meal allowances, e.g. when attending vocational school.

When is a full-time educational measure or full-time study applicable?

This is the case if it is vocational training or further training and you are not engaged in any employment alongside it. However, employment of up to 20 hours per week, a minor job, or short-term employment is not detrimental.

The home office allowance of 6 Euro per day (max. 1,260 Euro) is also available to those who are studying, training, or undergoing further education and spend more time learning at their home computer than in lectures or classroom instruction. The condition for the deduction is that you did not visit the university or training institution on the respective day.

Can I claim travel expenses for vocational training?

What can I deduct for full-time training or education?

Costs for training or further education can be deductible as income-related expenses, business expenses, or special expenses. Expenses for initial vocational training outside of an employment training relationship and for a first degree are - at least according to current legal status - only deductible as special expenses up to a limit of 6,000 Euro.

In other cases, expenses are deductible as income-related expenses or as pre-employment expenses without limit. This also applies to new vocational training after completing an initial training, as well as vocational training within an employment training relationship, e.g. apprenticeship, traineeship. Important items include travel, meals, accommodation, and incidental travel expenses.

If you, as an employee, participate in a training measure outside your company as part of your employment, this is considered an off-site activity. You can claim your expenses according to travel expense principles - i.e. travel costs with the business travel allowance, meal allowances, incidental travel expenses, and possibly accommodation costs - as income-related expenses.

This applies to people who continue their education or training alongside their job in the evenings and at weekends. This has been the case so far and continues to apply.

However, the situation is different if you undertake a full-time training course or full-time study outside your employment:

(1) Until 2013, the educational institution does not become a "regular workplace" if an employee undertakes a long-term training measure and visits the educational institution for over four years. This is also because it is not a company facility of the employer. Travel expenses are therefore deductible according to the rules for off-site activities with the business travel allowance and meal allowances (BFH rulings of 9.2.2012, VI R 42/11 and VI R 44/10).

(2) However, since 2014, it is stipulated in the law that for full-time education, the educational institution is the "first place of work" (even though it is not an employer's facility). This means: Journeys are only deductible with the distance allowance, and meal allowances are not considered. This applies both to further training for unlimited income-related expense deduction and to training for limited special expense deduction.

This is the case if it is vocational training and you are not engaged in any employment alongside it. However, the following are permissible:

• employment up to 20 hours per week,
• marginal employment (mini-job), or
• short-term employment (temporary job).

Currently, the Lower Saxony Finance Court has ruled against the tax authorities that part-time study is not a full-time training measure because part-time study is not designed for the student to devote themselves fully to it. Rather, part-time study (here: according to the description of the Fernuniversität Hagen) is designed to be pursued alongside employment. "The understanding of the Federal Ministry of Finance, according to which a course of study or training measure is always a full-time study or full-time training measure in the event of unemployment, cannot be derived from § 9 para. 4 sentence 8 EStG" (Lower Saxony Finance Court of 16.2.2022, 4 K 113/20).

What can I deduct for full-time training or education?

When can a home office be deducted during training?

According to current law, expenses for initial vocational training and first-degree studies outside of a training service relationship (e.g. apprenticeship) are deductible as special expenses up to 6,000 Euro. The costs for a first degree following an apprenticeship or for further training can be fully deducted as business expenses.

This may also include the costs for a home office, but only if it is the centre of all business and professional activities. In this case, either the actual costs of the office or an annual flat rate of 1,260 Euro can be deducted.

Tip: If the home office is used both to generate income and is the centre of all business and professional activities, the expenses or the annual flat rate should be allocated according to the extent of use and the activities performed there. However, it is also acceptable to allocate the expenses or the annual flat rate to a single activity without splitting them.

If the centre of all activities is not in the home office, only a daily allowance of 6 Euro per day can be deducted, up to a maximum of 1,260 Euro. The daily allowance applies per calendar day and does not increase even if different business or professional activities are carried out on one day for which the deduction conditions are met. The condition for the deduction is that the university or training institution was not visited on that day.

If you deduct the daily allowance as business expenses or income-related expenses for professional activity in your home, an additional deduction as special expenses is not possible.

When can a home office be deducted during training?