Tax-Free Home Office Budget: Equipment Instead of Cash Allowance

Many companies want to fund their employees' home offices and ask the same question: pay cash or provide equipment? From a tax perspective the answer is clear – and the difference is bigger than most expect.

The tax logic in two sentences

If the employer provides work equipment for professional use, this is free of income tax and social security contributions for employees – the items remain the property of the employer or the lessor. If the employer pays out cash instead, it is generally taxable and contributory salary.

Worked example: €1,000 allowance every three years

• Employer cost: roughly €1,210 including the employer's social security share.
• Net for the employee: after wage tax and contributions, around €500 remains, depending on tax class.
• Goods value after VAT: with €500, private purchases buy equipment worth about €420 net.
• Reality: in practice a share of employees buys no equipment at all and spends the money elsewhere.

The result: €1,210 of employer spend produces at best €420 of equipment value – with no guarantee that an ergonomic workplace exists at the end.

Providing equipment instead means no wage tax and no contributions, deductible input VAT on rent or purchase, and a workplace that actually meets requirements. See the full allowance vs. equipment comparison.

How large should the home office budget be?

As a planning figure, around €40 to €60 per employee per month covers a complete ergonomic setup in a rental model. Actual costs are usually much lower because of two effects:

• About 70 percent of employees use the offer at all.
• Those users draw only about 75 percent of the available budget on average, because some equipment is already in place.

Combined, real costs often land at roughly half the planned budget. Model it with the home office cost calculator.

Rent or buy?

With rental, the equipment remains the provider's property. That brings three practical advantages: predictable monthly costs instead of capital expenditure, no inventory and depreciation work, and no discussion in case of damage – onyo's rented equipment is property-insured, and we handle repair or replacement at no extra cost to the employer. When someone leaves, we ask whether they want to buy the equipment; if yes we invoice them the residual value, if no we collect it – usually free of charge via the return contingents.

Don't forget occupational safety

A budget does not replace a risk assessment. Duties under German occupational safety law apply to teleworking and mobile work too. A digital assessment creates clean documentation without anyone entering the home – try the digital risk assessment free of charge. Implementation details: home office workplace assessment.

Checklist for a tax-free home office budget

1. Provide equipment instead of cash – tax-free and effective.
2. Define the budget as a catalogue (desk, chair, monitor, light, accessories).
3. Document rules: entitlement, renewal cycle, returns, offboarding.
4. Link the risk assessment to the setup.
5. Review usage and plan the budget based on real uptake.

Conclusion

An allowance is expensive and uncertain; equipment is tax-free and effective. Design your home office budget as a benefit in kind with clear rules. See home office equipment for employers for what that looks like, and our answers section for detailed questions.

Note: this article provides general information, not tax or legal advice. Confirm your specific setup with your tax adviser or payroll team.