(2022) Can high renovation costs be spread over five years?

Disabled individuals often face very high expenses that healthy individuals do not have. This is particularly true for adapting the living environment for disability needs, such as barrier-free modifications in the home, installation of a stair lift, addition of a lift, construction of a wheelchair ramp, vehicle conversion, etc.

As these are unavoidable expenses, they can be deducted as general extraordinary expenses under section 33 of the Income Tax Act, subject to a reasonable burden. Due to the tax cash principle, the expenses must be fully declared in the year of payment in the tax return.

However, the full deduction in the year of expenditure may be ineffective if the extraordinary expenses exceed the total income from which they are to be deducted. In this case, the tax deductibility does not provide the desired relief effect. For this situation, the Federal Fiscal Court suggested a leniency regulation (section 163 of the Fiscal Code): Affected individuals should have the option to spread the high expenses over several years (BFH ruling of 22.10.2009, VI R 7/09).

However, the tax authorities are resistant and still state in the 2015 income tax guidelines:

"A distribution over several years is not permitted" (R 33.4 paras. 4 and 5 EStR). Unfortunately, the Federal Fiscal Court confirmed the strict stance of the tax authorities and ruled that extraordinary expenses are generally deductible in the year they are incurred. High costs for adapting a home for disability needs cannot be spread over several years for reasons of leniency if they have only a very limited tax effect in the calendar year in which they were incurred (BFH ruling of 12.7.2017, VI R 36/15).