Recognition for tax purposes of maintenance payments for children over the age of 25 years
Deduction of maintenance payments as extraordinary burdens
After a child’s 25th birthday, parents lose several allowances and tax-exempt amounts – these will have been taken for granted for a long time. Child benefit as well as child allowance and tax-exempt amounts for vocational training are no longer granted, although the child’s general living costs and studying expenses still remain high.
However, to some extent, parents are still able to compensate for the maintenance payments that they make to their offspring after their 25th birthdays, under certain preconditions, by offsetting these sums, against tax, as extraordinary burdens. For 2020, the fiscal authority will recognise for tax purposes maintenance up to the amount of €9,408. Moreover, no ‘reasonable burden’ will be deducted from this amount so that the tax benefit will apply from the first Euro. Furthermore, the basic contributions for the child’s health and long-term care insurance can likewise be offset in addition by the parents as maintenance payments, as a result of which the maximum amount would go up.
The deduction of maintenance payments will only be allowed if the parents are no longer entitled to child benefit. This would be the case once the child has reached the age of 25 years, at the very latest. Moreover, the child is not allowed to have his/her own assets or only a very small amount – in numerical terms this means that the assets may not exceed a value of €15,500 in total, otherwise the tax deduction ceases to apply (insofar as the assets are not residential property).
Own income
If the child’s annual own income is more than €624 then the deductible maximum amount of maintenance payments will be reduced by this amount. If the studying costs can be deducted by the child as work-related costs because the course is deemed to be subsequent vocational training (e.g., a master’s degree course) then these costs would reduce the relevant income of the child; this, in turn, would decrease the reduction in the maximum amount of maintenance payments.
Deduction with no documentation
If the studying offspring still live in their parents’ household, then the maximum amount of costs of €9,408 can be deducted without providing any supporting documentation. In such cases, the fiscal authority will assume that the costs for board and lodging will reach the maximum amount at any rate
Recommendation: If the child is studying away from home, then the expenses have to be documented for the tax office. Any amounts that are electronically transferred on behalf of or to the child should be documented.