Income-Related Expenses for 2026: What Employees Can Deduct

What are income-related expenses?

Income-related expenses are expenditures made to generate, secure, and maintain income. This is stated in Section 9(1), first sentence, of the Income Tax Act (EStG). For employees, income consists of wages, while expenses include everything required by the job: commuting, work equipment, continuing education, and travel.

The law lists examples, but the list is not exhaustive. The key factor is the connection to one’s profession. Anything that also serves a personal purpose is not deductible under § 12 No. 1 of the Income Tax Act (EStG), even if it benefits one’s profession.

Which travel expenses count?

The distance to your primary place of work is calculated using the commuter allowance: €0.38 per full kilometer of the one-way trip, starting from the first kilometer, up to a maximum of €4,500 per year (unless you use your own car or a company car). You can find all the details in the article on the commuter allowance.

Trips that are neither travel to the primary place of work nor travel to the family home—for example, to a client—are calculated using flat-rate kilometer rates based on the Federal Travel Expenses Act (Section 9(1), sentence 3, no. 4a of the Income Tax Act (EStG)): €0.30 per kilometer driven by car, €0.20 per kilometer driven by any other motor vehicle. Unlike the commute to work, every kilometer driven counts here, not just the distance. In cases of maintaining two households—that is, one’s own household plus an apartment at the place of employment—the necessary additional expenses are deductible. For trips home to the family, the rate is €0.38 per full kilometer of distance, but only for one trip per week; Trips made in a company-provided vehicle are not taken into account (No. 5). Accommodation at the place of employment is deductible at the actual cost, up to a maximum of €1,000 per month within Germany. New as of 2026 is the limit for housing abroad: a maximum of €2,000 per month. This does not apply if you are required to use company or employer-provided housing.

How are work equipment costs recognized?

Work equipment is considered an income-related expense (Section 9(1), sentence 3, no. 6 of the Income Tax Act (EStG)). The law specifically lists tools and typical work clothing. Regular clothing does not count, even if it is worn only for work. It serves personal purposes (Section 12, No. 1 of the German Income Tax Act (EStG)).

How a work tool is capitalized depends on its price. No. 7, sentence 2, states that § 6(2), sentences 1 through 3 of the Income Tax Act (EStG) apply accordingly. Accordingly, a work tool that can be used independently may be fully capitalized in the year of acquisition if the acquisition cost, excluding deductible input tax, does not exceed €800. Employees are not entitled to a VAT deduction (Section 9b(1) of the German Income Tax Act (EStG)). For them, therefore, the price including VAT applies. More expensive work equipment is depreciated over its useful life (No. 7).

For computer hardware and software, a useful life of one year may be applied (BMF letter dated February 22, 2022, IV C 3 - S 2190/21/10002). This is not an immediate write-off, and you may also apply a different useful life. The fact that the full amount is deducted in the year of purchase is based on a separate rule: the tax authorities do not object to it. Without this rule, a laptop purchased in November would be deducted at only two-twelfths of its value. Hardware explicitly includes peripheral devices such as monitors, printers, keyboards, mice, scanners, headsets, and docking stations. The letter also applies to surplus income, which includes wages.

At what amount do income-related expenses begin to apply?

Individual items are only taken into account if their total exceeds the employee lump-sum allowance of €1,230. This lump-sum allowance is already factored into the payroll tax withholding. Anything up to €1,230 is thus covered by this allowance; only the amount above that threshold affects taxable income.

Since 2026, there has been an exception: Union dues are taken into account in addition to the lump-sum amounts (Section 9a, Sentence 3 of the Income Tax Act) and are therefore not included in the €1,230 limit.

What are the rules regarding continuing education, college, and vocational training?

Continuing education expenses are considered income-related expenses if they are work-related. A special rule in Section 9(6) of the Income Tax Act (EStG) applies to vocational training and higher education: These expenses are considered income-related expenses only if the individual has previously completed initial training or if the training takes place within the framework of an employment relationship. Initial training is a structured training program lasting at least twelve months on a full-time basis and culminating in a final examination. It is considered structured if it is based on legal or administrative regulations or on the internal rules of an educational institution. If no final examination is required, the training is considered complete upon its scheduled conclusion. Initial training is also considered completed by anyone who has passed the final examination of a regulated vocational training program lasting at least twelve months without having undergone the training itself.

Therefore, examples of income-related expenses include a master’s degree program following the completion of a bachelor’s degree, as well as retraining or continuing education after completing initial vocational training.

For a first degree, this means: no income-related expenses, but special expenses of up to 6,000 € per calendar year (Section 10(1)(7) of the Income Tax Act (EStG)). The €6,000 limit includes not only tuition fees but also commuter allowances, home office allowances, expenses for maintaining two households, meal allowances, and expenses for off-campus housing. For married couples filing a joint return, this amount applies to each spouse. On-the-job training with a training allowance takes place within the framework of an employment relationship; the restriction in paragraph 6 does not apply in this case.

How do travel expense and meal allowances work?

Additional expenses for meals incurred during a business trip are claimed only as a lump sum, not based on receipts (Section 9(4a) of the Income Tax Act (EStG)). For a full calendar day with 24 hours of absence, the amount is €28. For the days of arrival and departure on multi-day trips involving an overnight stay, and for single-day absences lasting more than 8 hours, the amount is €14.

If the employer provides meals, the allowance is reduced, always based on the flat rate for a full calendar day: by 20% of €28, or €5.60, for breakfast, and by 40% each, or €11.20, for lunch and dinner. This also applies on days with a €14 allowance. The deduction may not exceed the daily flat rate: On the day of arrival with breakfast, €14 − €5.60 = €8.40 remains; with breakfast and lunch, nothing remains.

A reduction is also applied if the employer withholds or reduces the travel expense reimbursement due to meals or has taxed the meal at a flat rate. If you pay part of the meal yourself, this reduces the amount of the reduction; tax-free meal reimbursements preclude the deduction to that extent.

When working at the same location, the deduction of meal allowances is limited to three months. Overnight accommodation costs are also considered necessary expenses; after 48 months at the same place of work, they are only deductible up to €1,000 per month—the same amount as for maintaining two households.

What matters, and what doesn't?