Tax Help: Deducting Education or College Tuition from Your Taxes

Taxes are a very common topic in everyday working life. However, when it comes to vocational training or college, tax matters are often overlooked or ignored. As tax consultants in Düsseldorf
and Oberhausen
, we know that the IRS and taxes can also be relevant for trainees and students. There is also a great deal of uncertainty about when filing a tax return is possible and advisable. We are convinced that it is important to address tax matters early on. Therefore, in this article, we will explain in detail how and whether students and trainees can take advantage of tax benefits.

Paying Taxes and Deducting Expenses

When it comes to tax matters, two fundamental factors must first be evaluated: On the one hand, it must be clarified who is required to pay taxes and how much is owed. On the other hand, certain expenses can be deducted from taxes. As a trainee, you generally receive a salary. This constitutes taxable income. Similarly, certain expenses can be claimed. For students, the situation is slightly different. Studying alone does not initially generate income, so there is no taxable income. However, a large number of students hold part-time jobs to finance their university education and their living expenses. Under certain circumstances, this could result in a tax liability. Students are also allowed to claim deductions. The extent to which taxes are paid or expenses are deductible depends on the individual case. Below, we will therefore explain the most important information and scenarios.

The big question: First or second degree?

The tax treatment depends heavily on whether it is a first or second degree. Unfortunately, there is a lot of misinformation circulating on this topic, which contributes to confusion. We explain the difference:

First education: First education applies to anyone who does not yet have any other vocational or academic degree. First education tends to be less attractive from a tax perspective.

Second education: Second education applies to anyone who already holds a vocational or academic degree and is now pursuing further education or a degree program. The term “second education” refers not only to the actual second program of study but to all future educational programs. From a tax perspective, second education is significantly more attractive.

Taxes for Apprentices

For apprentices, the question of whether it is primary or secondary education is generally not relevant. Trainees receive a salary in nearly every training program. This establishes an employment relationship, and the trainee is considered an employee. However, this also means that trainees must pay taxes. At the same time, training costs can be fully deducted as income-related expenses.

Many trainees consider the costs incurred during their training to be relatively low. Filing a tax return would therefore not be worth the effort, at least according to a widely held view. In reality, however, there are many expenses that make filing a tax return well worth it. Trainees can deduct the following expenses:

• Training fees (registration, courses, and exams)
• Travel expenses to the training facility and vocational school
• Costs for work equipment and learning materials

In some cases, apprentices may also need to rent a second residence at their training location or move. These costs can also be claimed on the tax return.

By the way, travel expenses can be easily claimed on your tax return. Keep in mind that only one location can be listed as your primary place of work. This is usually the training company. Travel expenses are then calculated using the travel allowance of 30 cents per kilometer traveled. The commute to vocational school can be claimed as a “business trip.” Here, too, the business travel allowance is 30 cents per kilometer.

Taxes for Students

Students often have a slightly harder time with taxes than apprentices. This is because the respective employment conditions vary greatly. First, students must determine whether and when they are required to pay taxes. Income from a mini-job is generally tax-free. In addition, there is the working student regulation. Here, too, income is tax-free as long as the basic allowance is not exceeded. This means that students rarely have to pay taxes.

But what about the costs of studying? In principle, students can also claim their expenses on a tax return. Here, a distinction must be made between primary and secondary education. In the context of primary education, costs may only be claimed as special expenses. In secondary education, however, these are considered income-related expenses. For many students, this rule initially offers no tax advantage, because: If you don’t pay taxes, you can’t claim any deductions. With income-related expenses, however, a so-called loss carryforward is possible. Costs—i.e., losses—can thus be accumulated and deducted from future income. Students in secondary education can therefore accumulate income-related expenses during their studies and have them credited later in their careers. In the case of special expenses, however, no loss carryforward is allowed. Students in their first degree program can therefore only claim these expenses as tax deductions in the same year. In practical terms, this means that for many students, the expenses incurred in connection with their studies have effectively no tax impact.

How can educational expenses be deducted from taxes?

It has become clear that many students in their first degree program cannot benefit from tax advantages. Nevertheless, there are ways for students to claim their study costs for tax purposes.

For the deduction as a special expense to be applicable, students must be engaged in taxable employment. If the basic exemption amount is exceeded, the income automatically becomes taxable, and study expenses can be claimed as special expenses up to a maximum of 6,000 euros. A dual study program is also worth considering. During a dual study program, the student is in an employment relationship because they work at a company alongside their studies. As a result, expenses can be deducted as income-related expenses. A dual study program thus offers the tax benefits of vocational training.

Tax Consulting in Düsseldorf and Oberhausen

As tax advisors in Düsseldorf and Oberhausen, we are the ideal point of contact for questions regarding tax matters. Generally, apprentices and students do not need a tax advisor. However, consulting with a tax advisor or a payroll tax assistance association may be advisable. Of course, employers must also be aware of the tax implications related to apprenticeships and part-time employees. We would be happy to provide you with detailed advice on this matter. Simply contact us to schedule an appointment.