Study with kitchenette

A home office is only recognized if it is used exclusively or almost exclusively for the purpose of generating income. If rooms are also used for personal purposes, even a proportional deduction of expenses is not allowed.

A taxpayer operated an office for bookkeeping and clerical work. For this purpose, he used an open living area with a kitchenette in his private two-bedroom apartment, which also has a separate bedroom and bathroom. He claimed a pro-rata portion of the rent and utility costs for the living area used as an office as business expenses on his income tax return. The tax office did not agree with this. He subsequently took the case all the way to the Federal Fiscal Court.

Conditions for Deductibility

Following a change in the law in 2007, expenses for a home office as well as the costs of its furnishings may not reduce taxable income. An exception applies only if the taxpayer has no other room available for his business or professional activities, but this is limited to a maximum amount of €1,250. The costs are only fully deductible if the home office constitutes the center of all business or professional activities. In this case, the court also refers to a “business-like character.” Such a character exists when private use of these rooms is ruled out solely based on their furnishings. Such rooms, where private use is ruled out, can then also be deducted as business expenses without limitation. However, this was not the case in the judgment because, first, it was not a self-contained room, and second, a kitchenette was integrated. The plaintiff’s objection that the room was also used for meetings did not alter this.

Conclusion: Only rooms used almost exclusively for the purpose of generating income can be deducted as business expenses. If residential use is also conceivable, this is not possible.

The following are deductible if used predominantly for business purposes:
rooms furnished with office furniture, with the desk being central to this (e.g., a home office)
rooms that do not correspond to a typical home office but, due to their furnishings, can only be used for business purposes, such as a workshop, a recording studio, or a warehouse

The following are not deductible:
rooms that are (or can be) used for private purposes, such as a walk-through room or a “work corner” in the living area