Deductibility of Remote Location Offices for an Employee

In the process of corporate restructuring, an insurance company offered its employees the possibility to work from home. The home-based office was to be installed following the rules of labor protection and following certain operational models. The employer simultaneously reduced its office space and its number of desks. Employees did not receive an expense allowance to prepare their office at home. Employee Max, a mathematician of this insurance company, claimed in his tax return an amount of DM 25,244 as costs for installing his office at home by renovating his den. The tax office denied this deduction because the employer still wanted the employee to work two days a week in the company offices, and three days at home. From February 1999, Max was mainly working from his home office. This situation did not make tax payer Max eligible for deducting costs for his home office. So, Max submitted a letter from his employer that he worked two days in the company and three days at home. Then the tax office partially gave in and accepted part of the costs in 1999.

The BFH decided (judgment of May 23, 2006, re VI R 21/03) that whether costs for installing a home office can be deducted, and if so, in what amount, depends on the circumstances of the profession these expenses are related to, and not to the time they were made. It is not important whether the costs were occurred in the year before or in the year of commencement.

Furthermore, in order to be able to deduct the costs for a home office, it is required that be the center of your profession at home (§ 4 V 1 no. 6b EStG). This is determined in accordance with controlling judgments of Federal Tax Court: The taxpayer has his main place of operation where he performs such actions that are essential and characteristic for his profession and where he mostly works. Since the company reduced office space and only has its employees present part-time, and since the employee works three days a week at home, this situation qualifies for the remote office at home to be deducted.




Published on the old CMS: 2007/1/9
Read on the old CMS till November 2008: 266 reads