When are training costs deductible as special expenses and when as income-related expenses?
In principle, a distinction is made between training costs and further training costs. This distinction is crucial for determining whether the costs can be deducted only to a limited extent as special expenses or fully as income-related expenses.
1. Training costs – special expenses
Costs for a first vocational training or first degree are considered training costs for tax purposes. These can only be deducted as special expenses – however, up to a maximum of 6.000 Euro per year.
Important: Special expenses can only be taken into account in the year of payment. If there is no taxable income in that year, the deduction for special expenses does not provide any tax benefit.
2. Further training costs – income-related expenses
All costs incurred in connection with professional further training after the completion of the first training or first degree are considered further training costs. These can be fully deducted as income-related expenses if they are related to your job and serve to generate income.
This includes, for example:
- Retraining for a different profession,
- Further training in the current profession,
- Further training in a previously practised profession,
- A second degree.
3. First or second degree?
The tax treatment depends on whether it is a first or second degree:
- A first degree after leaving school is classified as initial training. The costs for this can only be claimed as special expenses up to 6.000 Euro per year – without loss carryforward.
- A second degree (e.g. a Master's degree after a Bachelor's degree or a part-time degree after training) is considered further training. The costs for this can be fully deducted as income-related expenses. A tax loss can even be carried forward to future years as a loss carryforward.
4. Loss carryforward for income-related expenses
Those who do not yet have an income but can claim training costs as income-related expenses (e.g. in a second degree) can claim these costs as anticipated income-related expenses. This creates a loss that can be carried forward to the first year with income and offset against it for tax purposes.
5. Example for clarification
Mr A and Ms B are both students without income.
- Ms B is studying for a first degree. She has 4.500 Euro in training costs. She can only deduct these as special expenses in the current year. However, since she has no income, this provides her with no tax benefit.
- Mr A is doing a second degree. He can claim the 4.500 Euro as income-related expenses and thus generate a tax loss. In the following year, when he has income, this loss will be offset against his income.
Result: Mr A pays less tax in his first year of employment than Ms B, even though both earn the same amount.
