Tax allowance - work-related (income-related) expenses/special expenses

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Name of the instrument - Local language
Steuerliche Absetzbarkeit als Werbungskosten/Sonderausgaben
Name of the instrument - English translation
Tax allowance - work-related (income-related) expenses/special expenses
Scheme ID
50
Country
Germany
Reporting year
2020
Type of instrument
Tax incentive for individuals
Sub-type of instrument
Treatment of work/profession related training costs
Type of entry
Single instrument
Short description

Adults can deduct costs related to continuing vocational training for their current occupation or a future occupation from the base of their individual income tax. The state co-funding - in the form of foregone tax revenues - equals eligible costs multiplied by the marginal tax rate (between 14 % and 45 %). Co-funded training is expected to sustain or increase future income, implying higher tax revenues later on. Eligible costs include tuition fees, costs for teaching material and professional literature, related travel and accommodation costs as well as the costs of a computer. For the deduction, a ceiling is introduced (EUR 6 000 in 2019). Individuals with no taxable income (an annual gross salary below EUR 9 744) cannot profit from the tax deduction. The tax incentive can be used once in each calendar year.

Level of operation
National
Name of a part of the country
Not applicable
Name of the region (for regional instruments)
Not applicable
Name of the sector (for sectoral instruments)
Not applicable
Relevance
Key instrument
§9 and §10(1) No 7 EStG German Income Tax ActLaw on Amendments to the Tax Code and other laws 21.7.2004 (§ 10 para. 1 no. 7 EStG)
Objective(s) and target(s)
Not available
Year of implementation
2004
Operation/management
The scheme is part of the federal taxation system. Costs for education and training reduce the base of the tax calculation.
Eligible group(s)
Employees and self-employed
Group(s) with preferential treatment
No preferential treatment
Education and training eligible
- Education (in general schools, colleages, unversities). - Training in a profession not related to the current employment and with the aim of changing the profession. - Further training in the current profession to expand or adapt to changing requirements.
Source of financing and collection mechanism
State (loss of tax revenue) Individual
Financing formula and allocation mechanisms
maximum amount: EUR 6.000 (reducing the tax base)
Eligible costs
Eligible costs reduce the tax base. The reduction is a benefit in line with the marginal tax rate (14 - 45%); however, training costs together with other eligible costs must be higher than a basic allowance for becoming effective. Details of tax treatment (depending on the type of education and training): - Education - Special expenses - Partial deductibility - Training not related to the current profession: special expenses - Partial deductibility - Furher training in the current profession: expenses deductible without limit - Retraining due to health reasons: extraordinary burdens (deductible without limit) Education and training costs can be classified as deductable only up to EUR 6000 as special expenses per calendar year.
Volumes of funding
Not available
Beneficiaries/take up
Not available
Organisation responsible for monitoring/evaluation
Federal Ministry of Finance
Most relevant webpage - in English
http://www.make-it-in-germany.com/en/for-qualified-professionals/workin…
Most relevant webpage - local language
https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren…
Recent changes

No recent amendment

Recent changes in response to COVID-19

No changes

Sources
Dohmen, Dieter. (2013). Finanzierung beruflicher Weiterbildung in Deutschland. Report. Zeitschrift für Weiterbildungsforschung. H, 3, 61-84.
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