The local tax office will accept non-residence in many forms, e.g., in student residences, in rented one-room apartments, or in shared housing. What is important is that the child needs to run their own household independently over a longer time period and not live in the household of the parents or one of the parents. A further condition for being allowed a tax-exempt amount is that the child has to be an adult already and have demonstrably completed vocational training or a course of studies.
Please note: It is unimportant whether the child also has a job while undertaking their vocational training or course of studies because the child’s income will not be offset against the tax-exempt amount. The same will apply to education allowances such as BAföG [a federal education assistance loan].
If the above-mentioned conditions are not satisfied for the full year then the local tax office will allow a tax-exempt amount for vocational training, at least, on a pro rata basis (monthly at one twelfth). If the parents are separated or divorced and they are each entitled to half the child tax allowance then, generally, they likewise have to split the tax-exempt amount for vocational training.
If parents are no longer entitled to child benefit for their child (e.g., because the child who is studying is more than 25 years old), frequently, they will still be able to deduct their financial contributions in their tax returns as maintenance payments up to the amount of the respective basic personal tax allowance (plus any health and long-term care insurance premiums that they have assumed for the child). However, the local tax office will only allow this cost deduction if the child also ‘requires support’. To this end, the child’s assets cannot exceed €15,500. However, vitally important assets are excluded here, such as, for example, an (appropriate) owner-occupied property belonging to the child. If, in the year when the maintenance payments are made, the child has income in excess of €624 then, moreover, the exceeding amount has to be deducted from the parents’ maintenance payments that can be offset.
Please note: Upon application, the local tax office can enter the tax-exempt amount in the electronic PAYE deductions so that, when the payroll tax deduction is calculated, a tax-exempt amount of €100 can be taken into account and used to reduce the withholding amount. Alternatively, it is also possible to wait and claim the tax-exempt amount when you complete your tax return.