Home office in the apartment

Many entrepreneurs use a room of their apartment as a home office for pursuing their commercial activity. The costs for this are tax deductible only if certain prerequisites are met.

Income tax

Expenditures or expenses for a home office within the apartment as well as its furnishing can be deducted only if it constitutes the centre of the entire operational and professional activity of the taxpayer.

Definition of the term “home office”

A home office is a room that has the characteristics of a residential room or office. Rooms within an apartment which by virtue of their functional purpose and furnishing are typical for the pursuit of a certain profession and are not usually used for private purposes from the outset are not covered by the term “home office.”

For example, the costs for the following rooms are in any case deductible as operational expenditures, without the need to verify whether the conditions for a tax-deductible home office are met:

• consultation and therapy rooms that normally preclude any private use on account of their furnishing (e.g. the consultation rooms of a general medical practitioner or dentist)
• Laboratories and their equipment
• Photographic studios
• Film and recording studios
• The premises of a law firm, which typically preclude any private use on account of their furnishing. This is the case if the law firm is used on a regular basis by persons not belonging to the family who are employed there (secretary) and/or within the framework of client visits (lecture room, sales office).
• Warehouse premises that house samples of goods or the goods themselves, thus precluding any private use.
• Soundproof musical rehearsal rooms if the necessity for such a room exists on account of the respective professional activity.
• Workshops

Apartment

A home office is deemed located in an apartment if it is in the same rented apartment or condominium or in the private residential house on the same land property (e.g. garden shed). The home office is in any case deemed located in the apartment if it can be entered from the apartment.

Furnishing, furniture

If there is no home office that is recognised for tax purposes, the furniture of the apartment or the home office is included in the prohibition on the deduction of tax, even if it is (also) used operationally or professionally. All objects serving the main purpose of making the rooms liveable are furniture.

Examples:
Chairs, tables (desks), (desk) lamps, cabinets, curtains, carpets, pictures, wall closets, bookshelves and chests of drawers

By contrast, typical working equipment, e.g. computers plus computer tables, copy and fax machines, printers, IT equipment, telephone systems remain deductible if used operationally or professionally even if they are set up in a home office that is non-deductible.

Tax deductibility when the room is the centre of the entire operational and professional activity

Tax deductibility – requirements:
Fiscal approval of expenditure for home offices and furniture requires that the expenditure be absolutely necessary for the kind of activity the taxpayer pursues and that the room designated as the home office be actually used exclusively or nearly exclusively for work.

Whether this requirement is met does not depend on the entirety of activities resulting in revenues; what counts is that the room is the centre of the individual source of income. For that, the following checks must to be conducted:

Checks in terms of the occupational profile

The judgement as to whether a home office constitutes the centre of a professional activity must be based on the typical occupational profile.

Activities (occupational profiles) whose centre is in the home office:

The activity is exclusively or nearly exclusively conducted in the home office; or those parts of the activity executed in the home office are essential for the occupational profile.

Examples:

Appraiser, writer, poet, teleworker, painter, composer, “home accountant”

Activities (occupational profiles) that have their centre outside the home office:

For these activities, the executed work component pursued outside the home office dominates the occupational profile. The work component allocated to the home office is usually not material for the assessment of the occupational profile.

Examples:
Teacher, judge, politician, conductor, lecturer, freelance worker with external business premises (e.g. office)

Check based on source of income

The assessment as to whether the home office constitutes the centre of the entire professional activity must be done based only on the source of income for which the home office is necessary.

If a person pursues several occupations, it must be checked whether the different activities in combination are to be seen as a (single) source of income, or whether each of them constitutes an independent source of income.

Several sources of income are given in any case when the occupations come under different types of income (e.g. income from commercial operation and income from dependent work).

Within the same type of income, different occupations constitute a (single) source of income when they are closely connected in substance (e.g. writing and lecturing in a certain field).

One source of income: A single occupational profile

If the activity defining the occupational profile is such that it is typically pursued in the home office, expenditures are deductible; otherwise not.

One source of income: Several occupational profiles

If a home office is used for several activities, each of which is to be allocated to a different occupational profile, it must be examined which of the different activities is predominant. This is to be based on the realised income.

Accordingly, if the income share to be allocated to the activity whose centre is located in the home office amounts to over 50%, the home office (in relation to the overall source of income) constitutes a centre within the meaning of the above definition.

Example:
As a technical writer, A. generates income of EUR 4,000; as a lecturer in the same technical field, EUR 10,000.

The activities have to be seen as one source of income (close connection). In this case, the home office does not constitute a centre and is not deductible, because lecturing predominates within the source of income. From the 2022 assessment onwards, it is possible to check whether the requirements for the workplace allowance (see information sheet) are met.

If, by contrast, the lecturing is only a by-product of the technical writing (since “the writer simply holds a lecture on thoughts he has already presented to the public in writing”), two different occupational profiles are not to be assumed. A writer is also entitled to a home office on account of his activity when the income from lecturing is higher than the income from writing.

Several sources of income: Centre outside the home office

If the centre is located outside the home office for all activities, expenditures are not deductible for any of the activities.

Example:
B. uses a home office for his activities as a politician and a teacher. In terms of the occupational profile, the home office is not a centre of any of the different sources of income. From the 2022 assessment onwards, it is possible to check whether the requirements for the workplace allowance (see information sheet) are met.

 Several sources of income: Activity with the centre outside the home office, and activity with the centre in the home office

Expenditures for a home office are taken into consideration only for the activity (source of income) for which the centre is located in a home office. Expenditures for a home office are not taken into consideration for the activity for which the centre is located outside the home office.

Example:

C. uses a home office within the scope of his (dependent) work as a judge as well as his (self-employed) work as a technical writer.

For his work (source of income), the home office constitutes a centre; it is deductible when calculating the revenues from self-employed work.

For his work (source of income) as a judge, the home office does not constitute a centre; hence it is not deductible when calculating the revenues from dependent work.

In this example, however, the expenses can be recognised in full when working as a technical writer if they would have been incurred in the same way if the home office had been used solely for the work as a technical writer.

In the event that C., alongside his work as a judge and a technical writer, also uses the home office for preparing (technical) lectures, the expenditures for the home office are tax deductible (only) when the writing predominates within the scope of the uniform source of income as a writer and a lecturer.

Several sources of income: Centre in a home office

Expenditures for a home office are taken into consideration for each source of income. In terms of the amount, an allocation to the various sources of income (for want of other indications) according to the income key is required.

Example:
D. uses a home office within the framework of his occupation as a writer as well as for his activity as an appraiser.

For both activities, the home office constitutes the centre. The expenditures must be allocated to the different activities (according to the income key).

Deductible expenditures

• pro-rata rental costs
• pro-rata ancillary costs (e.g. heating, lighting)
• pro-rata depreciation in the case of property (1.5% per year)
• pro-rata financing costs (not redemption sums, however; they are already taken into account under deductions)
• costs for furnishings if they are used in a home office that is recognised for tax purposes, are (almost) entirely used for professional purposes, and the scope of the work requires such objects.

The depreciation (1.5% per year) or the pro-rata financing costs can also be claimed if the object does not belong exclusively to the entrepreneur but is jointly owned by a relative (e.g. spouse), if the premises used are covered by the co-ownership share.

Sales tax

Entrepreneurs have an expanded option for input tax deduction from expenditures in relation to home offices in the apartment, including furniture.

The following criteria apply to the input tax deduction for home offices:

• actual (almost) exclusive entrepreneurial use
• the activity requires a home office

The calculation of the input tax deduction must be based on the ratio of the floor space of the home office to the overall floor space of the apartment.

Example:
An apartment has an overall floor space of 100 square metres. A home office with a floor space of 20 square metres is in this apartment.

The input tax deduction for the home office amounts to 20% of the sales tax paid for this apartment.

Stand: 01.02.2024