Do I have to pay taxes on my severance payment if I use it for further education?
March 5, 2022 | 40,00 EUR | answered by Lorenzo Zimmermann
Dear tax advisor,
I am facing the decision of whether to use the severance payment I recently received for further education. I have been working in the same company for many years and have decided to reorient myself professionally and invest in new qualifications. The severance payment would greatly help me financially to finance the further education and improve my career prospects.
However, I have concerns regarding the tax consequences. Do I have to pay taxes on the severance payment if I use it for further education? I want to ensure that I handle everything legally correctly and do not face unexpected tax payments.
Are there possibly tax planning options to use the severance payment tax-efficiently for further education? Or are there specific requirements that must be met in order for the use of the severance payment for further education to remain tax-free? I would be very grateful if you could help me in this matter and show me possible solutions.
Thank you in advance for your support.
Sincerely,
Dennis Eberstark
Dear Mr. Eberstark,
Thank you for your inquiry and your trust in my expertise as a tax advisor. It is understandable that you are thinking about how to use your severance payment tax-efficiently for further education to improve your career prospects. I am happy to help you understand the tax implications and to show you possible planning options.
In general, severance payments are subject to tax. This means that you must declare the severance payment in your income tax return and pay taxes on it accordingly. However, there is a way to reduce the tax burden if you use the severance payment for further education.
If you use the severance payment for professional further education, you can, under certain conditions, claim the education costs as business expenses. Business expenses are expenses that are work-related and have a tax-reducing effect. This includes education costs. If you can prove that the further education is work-related and improves your professional qualifications, you can deduct the costs from your taxes.
So, there is a way to use the severance payment tax-efficiently for further education by claiming the education costs as business expenses. It is important to collect all receipts and evidence of the education costs and to declare them in your tax return.
I recommend that you contact a tax advisor to discuss your individual situation and to examine possible tax planning options. A tax advisor can provide comprehensive advice and help you use the severance payment tax-efficiently for further education.
I hope that I could help you with this information and I am happy to answer any further questions you may have.
Sincerely,
Lorenzo Zimmermann
