Loss due to the costs of the home office.
February 16, 2011 | 50,00 EUR | answered by Michael Herrmann
Since reaching the retirement age, I am no longer employed but working freelance in the same industry. I had revenues of up to 50,000 euros for several years and always fully deducted my home office (worth approximately 1,500 euros) as my only workplace, which was also recognized by the tax office. However, due to the recession and the fact that I am no longer acquiring new clients, my revenues are now decreasing. For the first time for the tax year 2010, I would incur a loss due primarily to the costs of the home office. I would like to maintain the full deductibility of the home office for the future, as a client has announced projects for me this year. My questions are:
1. Would the tax office likely recognize the loss, i.e. the 100% deduction of the home office for 2010?
2. Could the tax office later demand repayment of the deducted costs if I do not generate profits again (lack of sustainable profit-making intention)?
3. Should I simply deduct the home office costs for 2010 at, for example, only 10% and then fully deduct them again when my revenues increase?
4. Do you have any other advice?
Dear inquirer,
first of all, thank you for your inquiry, which I am happy to answer based on the information provided and considering your commitment within the scope of an initial consultation. The response is given according to the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
I see no problem in principle with claiming the expenses for the home office for the year 2010 in full. The tax office has no initial reason to reduce the costs for 2010, even if a loss results. The risk of experiencing losses exists in self-employment activities and is also taken into account in taxation.
For a single loss year, the sustainable intention to make a profit is not questioned. A different situation would arise with ongoing losses that are not addressed. In this case, the tax office would suspect that costs motivated by personal reasons would be claimed as tax-deductible through a commercial or freelance loss.
In such a situation, the tax office would first investigate the facts, possibly issue a provisional note regarding the relevant income, and then monitor the situation over several years. However, this is not done after an initial loss.
If the provisional note or reservation for review is included in the tax assessment, the tax office may change the income after an examination or deny the intention to make a profit and revoke the loss even after years.
The intention to make a profit cannot be denied due to a single loss. Additional aspects must be considered that take into account the future development. The issue of lacking intention to make a profit cannot be addressed by only partially claiming the costs. These would be fully considered in a future forecast.
However, I repeat that I do not see any reason why the tax office should doubt your intention to make a profit in your case. It is unlikely to expect any complications.
I hope that these explanations have provided you with a sufficient overview of the situation within the scope of your commitment and this initial consultation.
Kind regards,
Michael Herrmann
Graduate Financial Economist (FH)
Tax advisor
