BERLIN, January 26, 2024 — Graduates entering the workforce in 2025 could be eligible for tax refunds worth thousands of euros, but unlocking those funds hinges on a surprisingly nuanced detail: whether their studies qualify as a “first” or “second” degree for tax purposes.
Understanding the Degree Distinction Can Mean a Significant Refund
Many students are understandably confused about how recent changes to tax law, particularly those stemming from the Growth Opportunities Act, affect their ability to carry forward study-related losses. However, the fundamental principle remains the same: the tax treatment of educational expenses depends heavily on whether it’s your first or subsequent qualification.
For those pursuing a first degree – typically a bachelor’s degree directly after high school – study costs are treated as special expenses, capped at 6,000 euros per year and claimable only in the year they’re incurred. Crucially, losses cannot be carried forward. If there’s no income to offset those expenses, the tax benefit vanishes. The Federal Constitutional Court upheld this regulation in 2019, reasoning that a first degree primarily serves personal development.
The situation is markedly different for a second degree, which generally includes a master’s degree following a bachelor’s, or any training undertaken after a first professional qualification. Here, all study-related costs are recognized as unlimited business expenses. If these expenses exceed income, a tax loss is generated, which can be claimed on a tax return and carried forward to future years – a process known as loss carryforward.
What About the 70% Rule?
Confusion surrounding a supposed “70% rule” for students arose from a separate change within the Growth Opportunities Act. The law relaxed the minimum profit tax for the years 2024 to 2027. Specifically, losses can now be offset without restriction up to a basic amount of one million euros (two million for married couples). Previously, only 60% of losses exceeding this amount could be offset; this has now been raised to 70%. However, this change primarily benefits companies and individuals with very substantial losses, and is largely irrelevant to the typical four- or five-digit losses accumulated by students.
Students can deduct a range of expenses, including semester contributions, tuition fees, specialist literature, laptops, travel costs to university or libraries, and thesis printing/binding costs. In a second degree, these items are aggregated as business expenses. If they surpass income from part-time work, a loss occurs, secured for the future through a voluntary tax return and a “declaration to determine the remaining loss carryforward” for each academic year.
The real payoff comes in the first full year of employment after completing a master’s degree. The accumulated loss carryforward is then offset against the first regular salary, significantly reducing taxable income and often resulting in a tax refund of several thousand euros. Failing to claim this refund is essentially leaving money on the table.
For students finishing their studies or writing their thesis in 2025, the rules remain clear: loss carryforward is only possible for a second degree. The Growth Opportunities Act did not alter this fundamental principle. To maximize potential benefits, students should submit tax returns retroactively for previous academic years – typically up to four years is possible. Declaring a second degree in 2025 allows for retroactive claims, maximizing the loss carryforward.
