The Annual Tax Act of 2022 (JStG 2022) is a typical omnibus bill comprising over 100 individual provisions spanning the entire spectrum of tax law. It also includes key initiatives by the “traffic light” coalition aimed at reducing the tax burden on citizens. In doing so, it also responds to court rulings and EU requirements. The law was passed by the Bundestag in early December. The Bundesrat approved it on December 16, 2022.
The 2022 Annual Tax Act and Its Key Provisions
The 2022 Annual Tax Act contains several important changes that relate, among other things, to these selected tax issues:
- Home Study and Home Office
- Income Tax Exemption for Certain Photovoltaic Systems
- Increase in the linear depreciation rate for new residential buildings
- Special Depreciation Allowance for the Construction of New Rental Housing
- Increase in the Employee Flat-Rate Allowance
- Increase in the Flat-Rate Deduction for Savers
- Retirement Plan Expenses
1. Home Office
Expenses for a home office can only be claimed for tax purposes as income-related expenses or business expenses if the home office is the center of all professional and business activities. In this case, the expenses for the home office are fully tax-deductible. If the home office is not the central location for professional or business activities and no other workspace is available for such activities, the expenses are limited to a maximum of EUR 1,250 per calendar year. Previously, this was a per-person maximum amount. Under the Annual Tax Act of 2022, this amount can now be claimed by all individuals who use the same home office, thereby multiplying the total amount available.
The home office allowance was extended and improved under the 2022 Annual Tax Act. For each calendar day on which taxpayers work exclusively from home, an amount of EUR 6 may be claimed for tax purposes. In 2023, the maximum amount will increase from the current EUR 600 to EUR 1,260. It is important to note that the work-from-home allowance is included in the flat-rate allowance for income-related expenses. It is therefore not granted separately. Excluded from this are expenses for work equipment that are not covered by the work-from-home allowance.
2. Income Tax Exemption for Certain Photovoltaic Systems
The tax framework for the purchase of small-scale residential photovoltaic systems has been expanded. The income tax exemption is capped at a gross rated output of 30 kWp for commercial properties and single-family homes, and at 15 kWp per residential and commercial unit for other buildings. Examples include multi-family homes and mixed-use properties. The phrase “used predominantly for residential purposes” has been removed from the law, meaning that photovoltaic systems located on buildings used for business purposes are also eligible for the tax exemption. The income tax exemption applies retroactively as of January 1, 2022, unlike in the draft bill.
3. Increase in the linear depreciation rate for new residential buildings
Under the 2022 Annual Tax Act , the straight-line depreciation rate (AfA) for new residential buildings will be increased from 2 to 3 percent starting in 2023.
4. Special Depreciation Allowance for the Construction of New Rental Housing
In addition to the aforementioned increase in the straight-line depreciation rate, the option for special depreciation for new rental housing construction is being reinstated, provided that specific efficiency criteria are met. Specifically, the building in which the new apartment is being constructed must meet the criteria for an “Efficiency House 40.” Changes have also been made to the maximum eligible tax base and the maximum allowable construction cost.
5. Increase in the flat-rate deduction for employees
Under the 2022 Annual Tax Act, the employee tax deduction will be increased again in 2023, from the current EUR 1,200 (in 2022) to EUR 1,230.
6. Increase in the saver’s flat-rate deduction
The flat-rate savings allowance is also set to increase significantly under the 2022 Annual Tax Act, rising from the current EUR 801 to EUR 1,000 per year, and from EUR 1,602 to EUR 2,000 for joint tax returns. Apprentices will benefit even more, as the training allowance will rise in 2023 from the current EUR 924 to EUR 1,200.
7. Retirement Plan Expenses
The good news is that the 2022 Annual Tax Act has brought forward the full tax deduction for pension contributions. What was originally planned for 2025 will now take effect as early as 2023. This change was prompted by several rulings from the Federal Fiscal Court (BFH) that criticized the double taxation of pensions. The phased-in taxation of pensions is still being worked out, but it is also expected to take effect in 2023.
Source: Federal Ministry of Finance
Photo: Steve Buissinne (Pixabay)
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