Avoid retroactive payments
Retroactive payments are not possible, i.e. an amount transferred in August can only be intended for maintenance in August or subsequent months. If the support payments do not cover the entire calendar year but only individual months, the maximum amount for support payments will be reduced accordingly.
(2021): Avoid retroactive payments
Maintenance payments: Cash payments for relatives abroad deductible
Many foreign nationals living and working in Germany support their relatives abroad. In this case, the tax office imposes stricter requirements on the proof of maintenance payments and the recipient's need. Cash amounts for relatives are often given to intermediaries when they travel home.
An intermediary can also be a neutral commercial transport company. The tax office generally does not recognise such a money transfer for tax reduction purposes (BMF letter dated 07.06.2010, BStBl. 2010 II p. 588, para. 17).
An exception is only made if, due to the special situation in the country of residence (e.g. crisis area), no other payment method is possible. In this case, you must document the identity of the intermediary (name and address), the exact travel itinerary, and provide complete proof of the origin of the money in Germany and its handover to the maintenance recipient. The journey itself must be proven by tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc.
Currently, the Baden-Württemberg Fiscal Court has slightly relaxed the strict view of the tax authorities and decided that maintenance payments to close relatives in Italy are also tax-deductible if the cash is handed over via couriers and if the delivery can be proven by questioning the courier as a witness (Baden-Württemberg Fiscal Court, 21.07.2015, 8 K 3609/13, published on 02.03.2016).
The case: An Italian guest worker wants to deduct maintenance payments of 6.000 Euro as extraordinary expenses, which he made to his parents living in Italy. 200 Euro were transferred via money transfer to an Italian bank, the other amounts of 1.800 Euro and 4.000 Euro were withdrawn from his bank account and given to a friend who worked as a food importer and therefore made regular trips to southern Italy.
The father had been unemployed for a long time, and the mother had only a small income from part-time work as a cleaner. The parents did not have their own bank account. The tax office did not recognise the maintenance expenses. The tax judges saw this differently after questioning the courier as a witness. The witness's detailed account of the trips to Italy and the handover of the cash was considered credible and consistent by the fiscal court.
Important
Maintenance payments are deductible as extraordinary expenses up to the maximum amount of 9.744 Euro (2021) without deduction of a reasonable burden. However, own income and benefits exceeding 624 Euro per year are credited.
The maintenance maximum amount and credit allowance are reduced according to the country group classification by one, two or three quarters if the maintenance recipient lives in a country with a lower standard of living.
Attention
Attention: The Federal Fiscal Court has recently ruled as follows: Maintenance payments are always only considered for tax purposes until the end of the year, and the maximum amount is prorated if payments are made during the year (BFH ruling of 25.04.2018, VI R 35/16).
The case: The son-in-law makes a maintenance payment of 3.000 Euro in December 2010 to his father-in-law living in Brazil, intended for a whole year. Monthly payments were not feasible due to high fees for international transfers. However, the tax office only recognises this payment with one-twelfth of the maximum amount (for December), as maintenance payments are only deductible if they serve the ongoing living needs of the supported person in the calendar year of the payment. The Nuremberg Fiscal Court had recognised the entire payment in 2010. The BFH has now contradicted this.
(2021): Maintenance payments: Cash payments for relatives abroad deductible
How can I claim maintenance payments to a person in need?
If you pay maintenance to a relative, you can claim this as extraordinary expenses for tax purposes, without any deductible being applied. However, the tax office will only consider the support if it is reasonable in relation to your net income. After deducting the maintenance payments from your net income, it must still be sufficient to cover your living expenses and those of your partner and children. This is the so-called sacrifice limit, i.e. the limit up to which the tax office recognises your maintenance payments. The sacrifice limit does not apply to maintenance payments to your ex-spouse or permanently separated spouse. The same applies if you make maintenance payments to your destitute partner with whom you live in a shared household.
How is the sacrifice limit calculated?
The basis for calculating the sacrifice limit is your net income, i.e. all income (taxable and tax-free). This includes, for example, your salary, child benefit, and unemployment benefit. Deductions are made for income tax, church tax, social security contributions, the solidarity surcharge, and the employee allowance or work-related expenses. The sacrifice limit is then one percent for every full 500 Euro of net income. For spouses, the joint income is used for the calculation. However, a maximum of 50 percent of your net income is recognised as the sacrifice limit. The percentage is reduced by five percentage points for each of your children for whom you receive child benefit and by five percentage points for your spouse, but by no more than 25 percent in total.
Example: You are married, have two children, and support your parents with 9.000 Euro per year. Your annual net income is 24.000 Euro.
Net income: 24.000 Euro
- 1 percent per full 500 Euro: 48 percent
- Less spouse: -5 percent
- Less 2 children: -10 percent
- Remaining: 33 percent
Your sacrifice limit is therefore 33 percent of 24.000 Euro, i.e. 7.920 Euro. Of your maintenance payments of 9.000 Euro, only 7.920 Euro are recognised. The maximum maintenance amount of 9.168 Euro (2019) also applies here, plus any contributions to health and nursing care insurance if you have paid such contributions for the maintenance recipient.
(2021): How can I claim maintenance payments to a person in need?
Can I also specify one-off payments?
Occasional or one-off maintenance payments are tax deductible as part of maintenance payments to dependants.
For a one-off maintenance payment, the tax office always assumes that it is intended to cover maintenance needs until the end of the year. The maximum maintenance amount is then reduced by one twelfth for each preceding month. If you make a payment in September, the maximum maintenance amount is reduced by 8/12. However, if you make the one-off payment in January, the maximum maintenance amount is not reduced. A maintenance payment in January thus secures the full maximum maintenance amount for the whole year, provided the supported person is in need for the entire year. The maintenance payment should always cover living expenses until the next payment. It does not matter whether these payments reach the pro rata maximum amount.
Exception
Maintenance payments to a spouse can always be deducted up to the maximum maintenance amount, regardless of when the payment is made.
(2021): Can I also specify one-off payments?
Maintenance payments to relatives abroad: Stricter proof required for cash payments
Many foreign citizens living and working in Germany support relatives abroad. People with a foreign spouse may also provide maintenance to their spouse's relatives. Since 2007, the tax office has imposed stricter requirements on the recipient's neediness and proof of maintenance payments for maintenance to relatives abroad. Particularly stringent proof requirements apply to cash payments.
The Federal Fiscal Court rejected maintenance payments to the mother living in Hungary because the cash payments were not sufficiently proven. In the case of maintenance payments to recipients living abroad, the parties involved are particularly obliged to cooperate in clarifying the matter and to obtain evidence. The evidence required to prove a fact depends on the circumstances of the individual case (BFH ruling of 09.03.2017, VI R 33/16).
- Proof of a cash payment requires a reliable recipient confirmation and a timely, complete proof of the "payment chain", i.e. evidence of withdrawals or the specific availability of these amounts at the time of payment by the maintenance payer. The mere existence of corresponding income and asset conditions is not sufficient.
- In addition, the maintenance payer must provide detailed and reliable evidence of the "how and when" of the cash payment. Therefore, convincing evidence is hindered if the payer cannot prove that they were at the payment location for the claimed cash payment. Although the maintenance payer does not have to personally hand over the cash, they must name the "bearer", i.e. the person who delivered the money.
- In the court case, there was no proof that the stated payments were actually made. The submitted receipts were insufficient. They did not indicate whether the recipient received the payments as a lump sum or in instalments. The confirmations stated a total payment of 1,800 Euro. Furthermore, the confirmations did not specify when the payment(s) were made. The documents were dated, but the date only referred to the day of issue, not the time of the cash payment.
Lohnsteuer kompakt
However, the BFH grants a relief: "The fulfilment of the obligations to clarify the facts and to provide for and obtain evidence must be necessary, possible, reasonable, and proportionate." For example, in the case of a civil war, evidential relief regarding the procurement of official certificates may be considered.
Note
For cash payments to relatives abroad, the tax office requires increased proof: The tax office requires you to provide domestic evidence of the availability of the corresponding funds, e.g. withdrawal receipts. There must be a connection between the withdrawal and the respective cash payment, which must not exceed two weeks. If you claim cash payments made during visits, you must also prove the trip, for example with tickets, fuel receipts, border crossing stamps, flight tickets, visas, etc. You must prove cash payments with a recipient confirmation. This must include: Name and address of the maintenance payer and recipient, date of payment, place and date of issue of the confirmation, recipient's signature.
(2021): Maintenance payments to relatives abroad: Stricter proof required for cash payments
