Home office allowance is a tax lump-sum amount that allows employees to claim days of professional activity performed from home as income-related expenses. It is intended to take into account additional expenses from working in the domestic area on a flat-rate basis, without the need to claim a separate home office under the strict requirements.
Legal basis and purpose
The home office allowance is part of the regular income tax rules on employment-related expenses under the Income Tax Act (EStG). It was introduced to taxwise recognise additional expenses arising from telework and increased home working due to the pandemic. Typically, an amount of 5 Euro per working day is applied, but no more than 600 Euro per year (equivalent to 120 days). The allowance is not a substitute for claiming actual costs by the self-employed, but a simplified deduction model for employees.
Application in tax and accounting practice
For employees (income-related expenses)
As an employee you enter the home office allowance in the tax return in form "Anlage N" under income-related expenses. Important points are:
- The allowance applies only for days on which you worked exclusively or predominantly from home.
- If your total employment-related expenses (including the home office allowance) are lower than the employee lump-sum deduction, the allowance has no tax effect (employee lump-sum deduction currently 1,000 Euro per year).
- If you claim a deductible home office under the strict requirements, you cannot additionally claim the home office allowance for the same cost components.
For self-employed persons and freelancers (business expenses)
For self-employed persons the home office allowance in this form is generally not applicable. Instead, the general rules on business expenses apply:
- If there is a clearly separated room used almost exclusively for business, proportional rent, ancillary costs, depreciation and furnishings can be claimed as business expenses.
- If no separate home office exists, expenses for working at home must be evidenced and booked directly as business expenses according to an appropriate allocation.
For posting in the financial accounting system concrete journal entries must be used (example below).
Evidence and documentation
The home office allowance does not require individual receipts for each expense incurred, but you should document the following:
- Number of days you worked from home (time records, calendar, diary).
- if applicable, employer confirmation or other evidence of home working days, especially in the event of spot checks by the tax authorities.
- for the self-employed: concrete evidence of actual costs (proportionate rent, utility charges, electricity, depreciation).
Without sufficient documentation the tax office may contest the allowance or the amount claimed.
Practical booking examples and case studies
Example 1 – Employee
You worked exclusively from home for 120 days in the tax year. You enter the allowance on the tax return: 120 days x 5 Euro = 600 Euro employment-related expenses. If this is your only exceptional employment-related expense item, taxable income is reduced accordingly, provided the employee lump-sum deduction has already been exceeded.
Example 2 – Self-employed person with a home office
You are a freelancer and use a separate home office (20% of the living area) exclusively for business. Monthly rent 1,000 Euro including utilities. You calculate proportionately:
| Item | Amount/month |
|---|---|
| Proportionate home office (20% of 1,000 Euro) | 200.00 Euro |
| Annually (200 x 12) | 2,400.00 Euro |
Booking (monthly): Business expenses: Rent – home office to Bank/Cash or account assignment according to the chart of accounts.
Practical notes
- As an employer you may make voluntary contributions towards home office expenses. The tax treatment of such payments must be examined separately.
- The home office allowance does not affect value added tax; it is an income tax deduction.
- Check annually whether the allowance or the application of actual costs is more advantageous for you from a tax perspective.
Conclusion: The home office allowance is a pragmatic instrument for employees to take account of home working in a simple way for tax purposes. For the self-employed the accurate, receipt-supported allocation of costs in the accounting records remains decisive. Ensure thorough documentation (daily records, supporting documents) and consult a tax advisor if you are uncertain about the application.