Persons in education or study who have already completed vocational training can set the associated costs for income tax return tax-reducing. Taxation is carried out between the first vocational training, i.e. First degree and second degree.

1st introduction

The number of students at universities in Germany has been steadily increasing in recent years. [1] While in the winter semester 2007/2008 around 1.71 million German students were still enrolled at German universities, in the winter semester 2017/2018 there were already 2.47 million. [2] This also increases the relevance of the approach of expenses for education and study in income tax returns.

This work deals with the approach of expenses for education and study in income tax return as advertising costs and special expenses. Starting with the income calculation scheme, the author first treats the deduction as advertising costs that already have an impact on the calculation of income and then moves on to the special expenses as alternatives to advertising costs. The author examines the possible approaches to their prerequisites and effects in order to identify differences and similarities. In this context, it addresses the different scope of options in the event of a loss. Finally, it lists the eligible eligible costs for taxable persons and explains their composition and identification. The aim of this work is to provide an overview of the possibilities for action with the respective consequences and to show in which situation which approach arises.

The author makes use of the classical research of the present legal texts, jurisprudence and literature. The findings obtained are analysed, evaluated and combined. The results are then systematically compiled and shown in the respective context.

In determining the taxable income, the income is first taken as a basis, separately according to the respective types of income, § 2 para. 1-5 EStG. In the following, the income from self-employment is discussed.

2.1. Definition

The income from self-employment is determined by income surplus invoice, in which the advertising costs are to be deducted from the income, § 2 para. 2 p. 1 no. 2 EStG i.V.m. §§ 8-9a EStG. Advertising costs include expenses incurred to acquire, secure and maintain revenue;

§ 9 Abs. 1 p. 1 EStG. Decisive is an initiation by the employment relationship or by the achievement of income. [3] Thus, in addition to a final (purpose-oriented) connection with income, a causal connection is also sufficient. [4] However, if the expenses also affect the private lifestyle, an advertising deduction is excluded, § 9 Abs. 5 p. 1 EStG i.V.m. § 4 para. 5 p. 1 point 7 EStG. Reference is made to Chapter 3.

In a study or training, knowledge is acquired that meets the requirements of § 9 para. 1 S. 1 EStG. Only through the new skills is a use in the activity possible, which can generate income. The deduction as advertising costs is in accordance with § 9 Abs. 6 S.1 EStG but limited. Accordingly, the taxpayer must have already completed an initial training or complete the vocational training or study within the framework of an employment relationship.

2.2 Initial training

Vocational training means the learning of a skill, the exercise of which leads to the generation of income. [5] An initial training is to be assumed if a full-time training with a minimum duration of 12 months and a final examination is carried out, § 9 Abs. 6 p. 2 EStG. This must be an orderly education on the basis of legal, administrative or internal regulations of an educational institution, § 9 para. 6 pages 2-3 EStG. An initial training is also deemed to be completed if the final examination was passed without participation in the vocational training, § 9 Abs. 6 p. 5 EStG. If the training plan does not provide for a final examination, the training is deemed to be completed with the actual scheduled termination, § 9 para. 6 p. 4 EStG.

An aborted vocational training is not a completed vocational training and thus in the examination according to § 9 para. 6 S. 1 EStG not to be included. [6] This is the case if an initial training has been completed unsuccessfully. [7] If both the statutory examination and the repeat examination have been completed unsuccessfully, subsequent training or Nevertheless, to qualify a subsequent study as a second education and to recognize the associated expenses as advertising costs. [] 8]

The definition of the terms "initial training" and "orderly training" only took place from the assessment period 2015.[9] Until then, training courses were completed, e.g. as taxi drivers or ski instructors, which had to be recognized as initial training and which subsequently qualified the study or any further training as secondary training. [] 10]

If the minimum training period of 12 months is not met, the pre-vocational measures or training are not initial training because they do not prepare for a sufficiently qualified professional activity. [11] Courses for vocational orientation or preparation, courses for obtaining the driving licence for commercial vehicles or the entitlement to drive forklift trucks (forklift trucks), company internships, measures for the placement of the simplest professional activities (learning activities, short-term instruction) or basic training in the Bundeswehr are likewise not to be recognised as initial training. [] 12]

The requirement for a first degree does not exist if a course of study is changed and the first course of study is not completed. [13] If an interrupted course of study is resumed, there is also no further study in the continuation. 14]

Expenses for an initial vocational training or a first degree, which also constitutes an initial training, are in accordance with § 9 para. 6 S. 1 EStG is excluded from the deduction as advertising costs.

2.3 Secondary education

The prohibition of deduction of § 9 para. 6 S. 1 EStG applies only to the costs of initial training. costs for further training or Further training in a profession already pursued or learned or for retraining measures that prepare for a change of profession constitutes an expense for a second training and is deductible as advertising costs, R 9.2 LStR.[15] The same applies to costs of further “new” vocational training, postgraduate studies or a second degree course. [16] A course of study which builds on the work already carried out, expands the specialist knowledge and skills and enables a professional advancement, is to be regarded as further training and thus as a second training, even if it is a first-time course of study. [17] Promotion costs are also deductible as advertising costs under these principles. [] 18)

2.4. Study in the context of an employment relationship

The deduction prohibition for the expenses of an initial training does not apply if the first vocational training or the first study takes place within the framework of an employment relationship, § 9 para. 6 p. 1 EStG. This is the case if the obligation to participate in education or study has been agreed in the employment contract. [19] Accordingly, the taxpayer is paid to participate in the vocational training measure. [] 20]

2.5. Anticipated advertising costs

Expenditure already incurred before revenue is generated is deductible as anticipated advertising costs if the expenses are “in a sufficiently concrete, objectively ascertainable context” with subsequent revenue. [21] In the case of vocational training measures, such as retraining or qualification measures, the necessary inducement correlation may be fulfilled. [22] In these cases, the taxpayer will be able to earn income in the future by using the newly acquired expertise in the labour market. [] 23]

If participation in vocational training measures takes place, e.g. to avoid an imminent or to eliminate an unemployment that has already occurred and no income is subsequently generated contrary to the expectation of the taxpayer, then advertising costs incurred in vain in advance are to be assumed. [24] Crucially, participation in the measure was aimed at generating taxable revenue. Also, whether the statutory audit of a measure is passed or not is irrelevant for the approach. [] 25]

3. special expenses

Special expenses may be incurred in accordance with § 2 para. 4 EStG be deducted from the total amount of income. Which expenses fall under the special expense deduction is defined in §§ 10 and 10a EStG. However, these expenses may only be qualified as special expenses if they are neither operating expenses nor advertising costs or are treated as such, § 10 para. 1 EStG.

Expenditure for own vocational training may be incurred pursuant to § 10 Abs. 1 No. 7 S. 1 EStG can be deducted up to 6,000 euros in the calendar year as special expenses. In the case of co-invested spouses, the amount is to be applied individually for each spouse, § 10 Abs. 1 Nr. 7 p. 2 EStG. An approach as a special expense is only eligible for costs of initial education or initial studies, since these are excluded from the advertising and operating expense deduction, § 10 para. 1 EStG i.V.m. § 9 para. 6 EStG and § 4 Abs. 9 EStG.

Accordingly, expenses for a course of study, which is carried out as a first degree and at the same time provides an initial training and does not take place within the framework of an employment relationship, are to be assessed as special expenses. [26] The expenses for initial vocational training are also special expenses and not advertising costs if this vocational training does not take place within the framework of an employment relationship[27]

4th Cost of Living

Costs of private living are to be distinguished from the deductible advertising costs and special expenses. These are not deductible in accordance with § 12 No. 1 S. 2 EStG, even if they are made to promote the profession or activity of the taxpayer. Exceptions from the prohibition of deduction are expenses whose recognition is expressly specified elsewhere in the law.

According to this principle, for example, expenses for German courses are not deductible as advertising costs or as special expenses, since they fall under the costs of private living. [28] The private aspects for acquiring German language skills are not irrelevant, since the basic knowledge of German is applied in daily life. [29] Only if the professional cause dominates and the private benefit is meaningless, an approach of the expenses is allowed. [30]

If an education or study is carried out only to promote a hobby of the taxpayer, the costs fall under the lifestyle and are not to be taken into account for tax purposes. [31]

5. losses

In the determination of income from self-employment, there may be a negative result, which can be taken into account in the context of loss compensation or loss deduction. [] 32]

5.1 Loss offsetting

Loss offsetting describes the offsetting of negative and positive income within an investment period. In the calculation of the taxable income according to § 2 Abs. 3 EStG formed the sum of the income. As a result, it is not only possible to offset within one type of income (internal/horizontal/unreal loss offsetting), but also to offset negative with positive income from different types of income (external/vertical/real loss offsetting).[33] The balance remaining after horizontal and vertical offsetting of income is the sum of income.[34] It should be noted that special loss compensation prohibitions apply to certain income, such as § 23 Abs. 3 pp. 7-8 EStG for losses from private divestiture operations.[35] These exceptions are not discussed further in this work, since the focus is on income from self-employment and losses from this type of income may be offset against profits from other types of income.

5.2. loss deduction

If not all losses can be offset by the loss offset within an assessment period, there is the possibility of an interim (interim) loss deduction according to § 10d EStG. According to this, both a loss transfer and a loss carry forward can be carried out.

A loss transfer is only allowed in the immediately preceding assessment period, § 10d para. 1 p. 1 EStG. It is limited to 1 million. EUR 2 million. Euro for spouses invested together and deducted primarily from the total amount of income, § 10d (1) S. 1 EStG. Upon request, the amount of loss reimbursement may be limited, § 10d Abs. 5-6 EStG. This reduction is beneficial for special expenses, extraordinary charges and other deductions as well as the basic allowance according to § 32a para. 1 p. 2 no. 1 EStG, since otherwise these amounts will not have any effect by the priority deduction of the loss transfer. If the profits to be expected in the future are higher than in the last assessment period and would thus be subject to a higher burden on progression, a claim for the application pursuant to § 10d para. 5-6 EStG to mitigate the future progression burden of the loss carry forward.

A loss carry forward is possible for the losses not yet taken into account for an unlimited period in the following years, § 10d para. 2 EStG. The previous day is up to 1 million. EUR 2 million. Unrestricted allowance for the euro in the case of co-invested spouses. The amount of the total income remaining after that, which is the 1 million. EUR 2 million. If it exceeds the euro, it may be charged up to 60%. Also in the case of loss carry-forward, the deduction shall be made before special expenses, exceptional charges and other deductions from the total income.

The remaining loss carry forward at the end of an assessment period is to be determined separately, § 10d para. 1 p. 1 EStG.

5.3 Impact

The qualification of training and study costs as advertising costs or special expenses has significance for the effect of expenses in the event of loss.

Advertising costs that have not been compensated for in determining income are carry-forward or repayable. [38] They can be offset against positive incomes of the current, last and future investment periods until they are exhausted. Thus, expenses for education and study under an approach as advertising costs are in any case taken into account in the calculation and determination of income tax.

In contrast, special expenses are not carry-forward or carry-forward.[39] If training and study costs are considered as special expenses, the expenses in the event of loss have only a partial or no effect. In the year of loss, the special expenses have no effect, since the tariff income tax is already 0.00 euros due to the loss. In the year of the loss transfer and in the years of the loss carry forward, the effect of the special expenses is the amount of the total amount of income and, if applicable, of an application pursuant to § 10d para. 5-6 EStG.

6 Expenses for education and study

The expenses for education and study are composed of several costs. In addition to the participation fees for e.g. courses, lectures and seminars or the semester fees of a course of study, the associated costs for documents and work equipment (e.g. specialist literature, writing material, calculator, computer, desk, etc.) or printing costs are to be set. [] 40]

In the case of expenditure on work equipment, the following must be observed: If the economic good is used over a period of more than one year, the acquisition costs are to be distributed over the entire ordinary period of use, § 9 para. 1 p. 3 no. 7 p. 1 EStG i.V.m. § 7 para. 1. p. 1 EStG. The costs for usable movable assets that are capable of independent use can be deducted in full as advertising costs in the year of purchase if the costs for the individual assets do not exceed 410 euros or 800 euros from the assessment period 2018, § 9 para. 1 p. 3 no. 7 p. 2 EStG i.V.m. § 6 para. S. 1 EStG.

If a home office is used and no other workplace is available, the costs for the room and for its equipment are deductible, § 9 Abs. 5 p. 1 EStG i.V.m § 4 para. 5 p. 1 point 6b EStG. The study must be spatially separated from the rest of the apartment.[41] The approach of a “working corner” or a passage room is ruled out.[42] The expenses for the study include, for example:[43]