Deducting the Same Costs Twice

What to do with operational costs when you are obtaining income as an employee and self-employed from one and the same kind of business? Can they be deducted exclusively as employment costs or professional costs or some kind of mixture between both? And when are they to be distributed, to which ratio?


A lawyer had a job at the law firm of colleague to work as an attorney. Simultaneously, this lawyer was pursuing income from self-employment as an attorney. As operational expenses, he deducted costs for insurances, car, entertainment, telephony, postage, etc. He did not explicitly declare any deductions relating to his employment. For his tax assessment 1999, the tax office disallowed part from the tax return and increased the profit from self-employment by DM 412 (which brought him into another tax bracket). The tax office was of the opinion that too much expense for employment could be compensated by increasing his profit from self-employment income.

The Federal Tax Court, BFH, held, that the tax office was wrong. The lawyer is only allowed to deduct such costs from employment that are related to this source of income – not more and not less. When his expenses are less then the statutory flat deduction (momentarily € 920) then this value is to be applied. In other words, the EStG allows the tax payer to deduct more than his actual costs, when these are below the statutory flat rate. Further, every employee is entitled to this statutory flat deduction – regardless of any other income (§9a cl. 1 no. 1 lit. a EStG). The tax office is not allowed to disallow the statutory regulation as this would deprive the tax payer of his statutory rights without ground. Therefore, such approach violates the doctrine of  equal treatment under the law of art. 3 III GG.

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