When are training costs deductible as special expenses and when as income-related expenses?
In principle, a distinction is made between training costs and further training costs. This distinction is crucial for determining whether the costs can be deducted only to a limited extent as special expenses or fully as income-related expenses.
1. Training costs – special expenses
Costs for a first vocational training or first degree are considered training costs for tax purposes. These can only be deducted as special expenses – however, up to a maximum of 6.000 Euro per year.
Important: Special expenses can only be taken into account in the year of payment. If there is no taxable income in that year, the deduction for special expenses does not provide any tax benefit.
2. Further training costs – income-related expenses
All costs incurred in connection with professional further training after the completion of the first training or first degree are considered further training costs. These can be fully deducted as income-related expenses if they are related to your job and serve to generate income.
This includes, for example:
- Retraining for a different profession,
- Further training in the current profession,
- Further training in a previously practised profession,
- A second degree.
3. First or second degree?
The tax treatment depends on whether it is a first or second degree:
- A first degree after leaving school is classified as initial training. The costs for this can only be claimed as special expenses up to 6.000 Euro per year – without loss carryforward.
- A second degree (e.g. a Master's degree after a Bachelor's degree or a part-time degree after training) is considered further training. The costs for this can be fully deducted as income-related expenses. A tax loss can even be carried forward to future years as a loss carryforward.
4. Loss carryforward for income-related expenses
Those who do not yet have an income but can claim training costs as income-related expenses (e.g. in a second degree) can claim these costs as anticipated income-related expenses. This creates a loss that can be carried forward to the first year with income and offset against it for tax purposes.
5. Example for clarification
Mr A and Ms B are both students without income.
- Ms B is studying for a first degree. She has 4.500 Euro in training costs. She can only deduct these as special expenses in the current year. However, since she has no income, this provides her with no tax benefit.
- Mr A is doing a second degree. He can claim the 4.500 Euro as income-related expenses and thus generate a tax loss. In the following year, when he has income, this loss will be offset against his income.
Result: Mr A pays less tax in his first year of employment than Ms B, even though both earn the same amount.
When are training costs deductible as special expenses and when as income-related expenses?
What can I claim as special expenses in my tax return?
Special expenses are personal living expenses that are exceptionally eligible for tax relief. The special expenses you can declare in your tax return are divided into two groups: pension expenses and other special expenses.
The other special expenses referred to on this input page are automatically taken into account by the tax office with the special expenses allowance. The special expenses allowance is set very low at 36 Euro for single persons and 72 Euro for married couples. It is therefore relatively easy to exceed this amount. These include, in particular, church tax paid, donations, childcare costs, and maintenance payments to an ex-spouse.
Pension expenses include contributions to basic health insurance and compulsory long-term care insurance, as well as private pension schemes and contributions to certain private insurance policies, such as private liability, accident, and disability insurance.
Important
The special expenses allowance does not apply to pension expenses. These are not unlimited deductible special expenses but are only deductible up to a maximum amount.
The second part of the special expenses, pension expenses, is divided into pension contributions, contributions to basic health and long-term care insurance, and other insurance. Pension contributions mainly include contributions to the statutory pension insurance or a private Rürup pension (funded pension scheme).
Other insurance includes contributions to health and long-term care insurance (beyond basic cover), unemployment insurance, accident and liability insurance, term life insurance, disability insurance, as well as capital life and pension insurance policies taken out before 2005.
Please enter the pension expenses in the “pension expenses” section of our tax return.
What can I claim as special expenses in my tax return?
What can I deduct as donations and membership fees?
You can deduct donations and membership fees for the promotion of tax-privileged purposes. These include:
- Charitable purposes
- Benevolent purposes (e.g. workshops for the disabled, meal services or drug counselling centres)
- Church purposes
- Political parties
- Independent voters' associations
- Charitable associations and organisations
- Public institutions in Germany: e.g. universities, universities of applied sciences, research institutes, authorities, schools, state museums, state hospitals
- Legal entities under public law in Germany: e.g. city and municipal administrations, municipal associations, federal states and the federal government, as well as churches
However, donations for a club's commercial business operations are not deductible. For example, if you donate drinks for a club festival, you cannot enter this in your tax return.
To deduct donations from tax, they must be made without receiving anything in return. You can deduct not only cash donations. Donations in kind, expense donations and remuneration donations are also considered tax-relevant.
What can I deduct as donations and membership fees?
When can I deduct church tax as special expenses?
If you are a member of a church, you can deduct the church tax as special expenses. Prepaid or additional church tax can also be claimed for tax purposes.
If you are a member of a religious community that does not levy church tax, you can deduct payments to them “as church tax” – i.e. 8 or 9 percent of income tax, depending on the federal state. However, the church must be recognised as a public corporation in at least one federal state. A receipt is required. Examples of such religious communities include the New Apostolic Church, the Evangelical Free Churches, the Greek Orthodox Metropolis, the Independent Evangelical Lutheran Church, the Methodist Episcopal Church, the Salvation Army, and Jehovah's Witnesses.
Payments that exceed the corresponding church tax can be claimed as donations for church purposes.
Under new legislation, church tax payments to religious communities in an EU/EEA state are also recognised as special expenses.
If the religious community is not recognised as a public corporation, you can deduct your contributions up to 20 percent of the total income as donations for "the promotion of religious purposes". You must enter this information in the “Donations” section. This applies, for example, to the Old Buddhist Community.
The Scientology Church is not a religious community.
When can I deduct church tax as special expenses?
What are permanent financial burdens?
Perpetual burdens are pension payments that a taxpayer makes to another person on a long-term basis and due to a legal obligation. These are regular payments, the duration of which, in the case of a pension payment, is linked to the lifetime of one or more persons. Perpetual burdens must be provided for at least ten years.
Unlike pension commitments, perpetual burdens can be adjusted at any time. They are therefore variable in amount and depend on the financial circumstances of the payer and the recipient. This may be the case, for example, if the financial situation of the contracting parties changes.
Perpetual burdens can be in cash or in kind. An example of in-kind payments is the so-called "born" perpetual burdens. This includes, for example, the obligation to provide meals for a person.
Abbreviated perpetual burdens can also be agreed if they end either with the death of the person or at the latest after a certain period.
Caution!
Since 2008, no distinction has been made between perpetual burdens and annuities for tax purposes. Pension payments are now always considered "perpetual burdens". This means that the calculation of the yield share required for life annuities is no longer necessary.
What are permanent financial burdens?
