Expenses for a home office of a self-employed person who calculates their profit using an income statement are deductible as business expenses. However, the Federal Fiscal Court has specified in terms of content and timing which record-keeping obligations apply to such expenses. Compliance with these requirements is mandatory. Failure to do so means that the expenses are generally not deductible.
Practical example:
The plaintiff, who earned income from self-employment, among other things, in the year in dispute, lived in a home consisting of a basement, ground floor, upper floor and converted attic. He carried out his self-employed activity in the attic, which was furnished as a study. He also used a library on the first floor. In his income tax return for the year in dispute, the plaintiff declared, among other things, a loss from freelance activities. This was based on depreciation on immovable assets and expenses for a home office.
As part of the income tax assessment, the tax office reduced the depreciation amounts and the other operating expenses for the study. The plaintiff lodged an appeal against this. The tax office then allowed a higher business expense deduction for the costs of the study. In his lawsuit, the plaintiff continued to request a deduction of business expenses in the amount he had declared. The tax court dismissed the claim on the grounds that the expenses for the home office were not deductible on the merits, as the claimant had not fulfilled his record-keeping obligations.
The BFH confirmed the opinion of the tax court. The consideration of expenses for the plaintiff's home office as business expenses for his income from self-employment is excluded pursuant to Section 4 para. 7 sentence 2 EStG due to a breach of the recording obligation under Section 4 para. 7 sentence 1 EStG. Expenses for a home office within the meaning of Section 4 para. 5 sentence 1 no. 6b EStG must be single and separately from other operating expenses be recorded. Compliance with this obligation is a prerequisite for the deduction of business expenses.
A mere collection of receipts is not sufficient. All expenses for the home office and its equipment must be single and promptly be recorded in a special column of the expense records, or at least bundled in a separate written or digital document. This is the only way to ensure the correct allocation of such expenses and a simple check of their deductibility.
Conclusion: In the case in dispute, the required individual recording of costs was missing. The plaintiff initially only collected the receipts and only prepared the overview later for the tax return. The summarized statement of the costs for the home office in the income statement also did not meet the legal requirements. A precise and individual record of the expenses would have been necessary.