Are divorce costs tax deductible?
Until 2012, divorce costs – particularly legal and court fees – could be claimed as exceptional expenses under Section 33 of the Income Tax Act. However, only the costs of the actual divorce proceedings and the pension adjustment were deductible.
Costs for so-called ancillary divorce matters, such as maintenance, custody, or asset division arrangements, were not tax-deductible.
Change in legislation from 2013
Since 2013, divorce costs are generally no longer deductible as exceptional expenses. This applies not only to the actual divorce proceedings and the pension adjustment but also to all ancillary divorce matters.
The legal basis is Section 33 (2) sentence 4 of the Income Tax Act, which generally excludes the deductibility of legal costs. An exception applies only if the costs are necessary to secure the taxpayer's livelihood. In practice, however, this exception is interpreted very restrictively.
BFH ruling of 2017
In its ruling of 18.05.2017 (Ref. VI R 9/16), the Federal Fiscal Court clarified that divorce costs generally do not affect the livelihood. Even if a divorce significantly impacts life, this is not sufficient to assume an exceptional financial burden in the tax sense.
Legal costs related to post-marital maintenance
A 2019 ruling by the Münster Finance Court caused a stir. It left open the possibility that legal costs to enforce post-marital maintenance could be deductible as income-related expenses under certain conditions. This was particularly discussed if the recipient of the maintenance payments agrees to income splitting, where the payer can deduct the maintenance payments as special expenses, and the recipient taxes them as other income (Section 22 No. 1a of the Income Tax Act).
However, this view was rejected by the Federal Fiscal Court in its ruling of 18.10.2023 (Ref. X R 7/20). The BFH decided that even in cases of income splitting, legal costs cannot be deducted as income-related expenses.
Subsequently, the Münster Finance Court ruled on 18.09.2024 (Ref. 1 K 494/18 E) that these legal costs cannot be deducted as exceptional expenses either.
Conclusion
Since 2013, divorce costs are no longer tax-deductible – neither as exceptional expenses nor in any other form. This applies to:
- the divorce proceedings themselves
- the pension adjustment
- all ancillary divorce matters such as maintenance arrangements, custody, and asset issues
Legal costs to enforce post-marital maintenance cannot be claimed as income-related expenses – even if the recipient taxes the maintenance payments as part of income splitting.
