Maintaining Two Households Abroad – Tax Implications
Maintaining two households for work-related reasons is an important issue for many employees—whether they are on a domestic assignment or a long-term stay abroad. However, while the deductibility of housing costs is relatively clearly regulated for domestic assignments, different standards apply to stays abroad.
A recent ruling by the Federal Fiscal Court (BFH) now provides greater clarity—especially for employees working abroad on behalf of German authorities or international companies.
What does “maintaining two households” mean?
A dual household exists when an employee must maintain a second household at the place of employment in addition to their primary residence for professional reasons.
In Germany, a maximum of 1,000 euros per month in housing costs may be claimed as income-related expenses. However, this limit does not apply to assignments abroad—which, in practice, repeatedly leads to uncertainty and disputes with the tax office.
BFH Ruling Brings Clarity on Stays Abroad
The case: A senior civil servant at the Federal Foreign Office was assigned abroad (to an embassy) in 2015. He lived there in a 200-square-meter rental apartment. Although internal guidelines provided for only 140 m², his employer accepted the full rent as necessary—the price was within the local market range.
The tax office, however, reduced the deduction for income-related expenses—citing the permissible living space and additional tax-free foreign income. The case ended up before the Federal Fiscal Court (BFH).
The ruling (BFH, ruling of June 17, 2025 – VI R 21/23):
- Accommodation costs are deductible in their actual amount if the employer recognizes them as necessary.
- The limit of 1,000 euros per month applies only to domestic cases.
- The BFH confirms: What matters is an individual assessment of reasonableness, not a flat-rate square footage.
- Only the rent subsidy actually paid is to be deducted from the income-related expense deduction—but not additional tax-free foreign income.
What does this mean for professionals working abroad?
This is good news for employees on assignments abroad: Necessary housing costs can be fully deducted for tax purposes, provided they are demonstrably work-related and in line with local standards.
But be careful: It depends on the individual case. There is no flat-rate rule as there is domestically—each case must be documented and justified in a transparent manner.
Need for Reform from a Practical Perspective
In its ruling, the Federal Fiscal Court (BFH) also pointed out the unequal treatment of domestic and foreign cases. While the maximum amount of 1,000 euros in Germany has remained unchanged for years, there is no statutory upper limit for stays abroad.
The Bundesrat has therefore proposed, as part of the Tax Amendment Act 2025, to introduce a limit of 2,000 euros per month for stays abroad as well. Whether this will happen remains to be seen. Many experts are instead calling for the outdated €1,000 maximum rate for domestic cases to finally be adjusted to reflect actual price trends in the housing market.
Conclusion: Documentation is key—we’re here to help
Anyone working abroad and maintaining a second residence there should:
- Carefully retain all lease agreements, certificates, and statements
- Clearly document the professional connection to the residence
- Check the tax implications of any rental subsidies received
- Seek tax advice early on if in doubt
The correct tax treatment can amount to several thousand euros per year. Therefore, do not accept blanket deductions—your case is unique and should be treated as such.
Advice on stays abroad and maintaining two households
As experienced tax advisors in Düsseldorf and Oberhausen, we assist you with all questions regarding income-related expenses, maintaining two households, and stays abroad—whether you work in the public sector or the private sector.
Contact us before the tax office makes a decision—we’ll protect your tax entitlements with expertise and a personalized approach.
