Generally speaking, the answer is yes for both the German and the US tax world. However, both concepts are not identical, so let’s look at the similarities and differences.
Under US law, the “Business Use of Your Home” will let you deduct expenses for the business use of your home. Essentially you must use part of your home:
- Exclusively and regularly as your principal place of business
- Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business
- For rental use
Use for employment will disallow you to take this deduction!
Under German law any use of your home space for the purpose of income generation will let you take a home office deduction – especially the use of employment will not prevent you from taking the deduction.
The big question now is, how much can you actually claim – how do you figure the deduction?
Under both the German and the US side you can either claim actual expenses or a simplified version.
The actual expenses are very similar – they need to be either directly or indirectly related to the office space and also do not vary greatly in nature. Also, the business percentage based on the area or number of rooms is used to determine the total deductions. Home impairments can be tricky for claiming depreciation. Ideally you have invoices available which show how the expenses relate to different areas or rooms – especially the home office.
Differences between the US and German tax treatment exist predominantly in the following areas:
- German tax law will let you use actual expenses without ceiling only if there is a proper office that is a separate room and set up as a proper office, or it is a separate structure. A nook somewhere or an area just separated by book shelfs will not count. The US tax law is usually more generous accepting just a business “area”.
- The simplified method under US tax law will let you use a standard deduction of $5 per square foot – unless the area in question exceeds 300 square feet.
The simplified method under German tax law will give you €6 per business day, regardless of the area or space used.
As you can tell, the home office deduction is a great way of claiming expenses that you would have regardless for tax purposes under both the US and German tax law. Given the differences in concepts though, please let your taxperts know if you are considering going down this route and we will be happy maximizing your tax savings – to include any advise if we feel like the expense to justify it to the tax office will exceed your benefits!
