The government's decision to remove the home office deduction threatens to increase the tax burden on small business owners and sole traders, according to the Federation of Finnish Enterprises (Suomen Yrittäjät).
"According to our estimates, this decision threatens to tighten the tax situation for over 4,000 sole traders, despite cuts on earned income tax," said Laura Kurki, a leading tax expert at the federation, in a statement published earlier this week.
Kurki further noted that people earning between 2,000 and 8,000 euros would be hardest hit.
While the federation opposes the removal of the standard home office deduction, it suggested the tax break could be reduced to 750 euros if necessary for state financial reasons.
They pointed out that all wage earners are automatically granted a 750 euro income tax deduction from their salaried income, even if the standard office deduction is eliminated.
However, self-employed people do not receive a comparable deduction for business income. This means entrepreneurs who have relied on the standard home office deduction may now face higher taxes.
According to the Federation of Finnish Enterprises, keeping the standard home office deduction at 750 euros would also benefit self-employed professionals without creating any extra administrative burdens.
"It is excellent that the government made significant tax decisions that seek to stimulate growth. However, the elimination of the standard office deduction threatens to weaken the position of sole traders and will not necessarily improve the state of public finances," Kurki said.
Deductions more complicated
The government’s decision to eliminate the standard home office deduction could affect hundreds of thousands of taxpayers. In 2023 alone, some 350,000 people claimed this tax break.
Its removal will mean big changes for those who work from home, and may also undermine the impact of recent tax cuts, particularly for low- and middle-income earners.
The government is not eliminating the possibility of deducting actual home office expenses, but doing so is more complicated than claiming the standard deduction, said Kaija Selkäinaho, a senior specialist at the Finnish Tax Administration.
To deduct actual expenses, taxpayers must provide reliable documentation, which includes receipts and calculations for all related costs — a more complex process than using the standard deduction.
In practice, remote workers have typically claimed the standard deduction, while those renting office space elsewhere are more likely to deduct actual expenses.
This is largely because it's hard to reliably separate and document the share of home rent or electricity used for work, making the standard deduction a simpler alternative.
Actual expense-based deductions have remained relatively minor compared to the now-discontinued standard deductions.
Selkäinaho, however, highlighted that all wage earners automatically receive a 750 euro income acquisition deduction, so the home office deduction only provides an added benefit beyond that threshold.
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