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200 Euro were transferred via money transfer to an Italian bank, the other amounts of 1.800 Euro and 4.000 Euro were withdrawn from his bank account and given to a friend who worked as a food importer and therefore made regular trips to southern Italy.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
Maintenance payments to relatives abroad: Strict proof requirements apply!
Many foreign nationals living and working in Germany support their relatives abroad. However, individuals with a foreign spouse also provide maintenance to their spouse's relatives. For maintenance payments to relatives abroad, the tax office has imposed stricter requirements on proof of payments and the recipient's need since 2007.
Recently, the Federal Fiscal Court rejected maintenance payments to parents living in Indonesia because need was not sufficiently proven. Certificates of need for adult maintenance recipients must include detailed information about income received before the start of support.
Given the limited ability to verify circumstances abroad, comprehensive information is essential. It is generally reasonable to provide fully completed certificates (BFH ruling of 07.05.2015, VI R 32/14).
The case: The son living in Germany supported his parents in Indonesia with 5.000 Euro. He presented two documents from the municipal administration (Indonesia) to the tax office, stating that his parents do not receive a state pension as civil servants or public employees. Subsequently, he provided another certificate stating that the father is not employed, has no income of his own, and does not receive a pension. However, the BFH did not consider this sufficient proof of the parents' need.
The BFH is very strict here: The judges criticised that the submitted "maintenance certificates" from the municipal administration (Indonesia) were incomplete in essential parts. In particular, there was no information about income received by the parents before the start of support and thus no information on how they supported themselves before the son's maintenance payments began.
Furthermore, the submitted certificates from the municipal administration were incomplete as they did not provide information on the parents' financial situation, such as (owner-occupied) property. These certificates only excluded own income and receipt of a pension (as civil servants or public employees) but said nothing about other income, e.g. from rental. Therefore, the information contained in the certificates could not be used to conclude their need.
Lohnsteuer kompakt: However, the BFH allows for some relief: The fulfilment of obligations to clarify the facts and to provide and obtain evidence must be possible, reasonable, and proportionate. For example, in cases of civil war, evidential relief regarding the procurement of official certificates may be considered.
(2021): Maintenance payments to relatives abroad: Strict proof requirements apply!
Are maintenance payments classed as special expenses or exceptional costs?
Maintenance payments to your divorced or permanently separated spouse can be deducted either as special expenses or as extraordinary burdens. However, this decision applies to your entire maintenance payment, meaning you cannot enter part as special expenses and part as extraordinary burdens in the tax return. Which decision is better always depends on the individual case.
Especially for higher maintenance payments, it is advisable to deduct them as special expenses, as the maximum tax saving can be higher. The person obliged to pay maintenance can deduct up to 13,805 Euro p.a. plus the contributions to health and nursing care insurance for the maintenance recipient. However, the recipient of the payments must give their consent and fully tax the income. The application for the tax deduction and the recipient's consent are made with the "Anlage U".
The deduction as extraordinary burdens is simpler, as you do not need the ex-partner's consent. For this, you can deduct up to 9,744 Euro in 2021 (up to 9,408 Euro in 2020) per year plus health/nursing care insurance contributions (the contributions made for the maintenance recipient's security). In the year of separation, joint assessment is usually more tax-attractive. If you opt for joint assessment in the year of separation, maintenance payments are not considered and cannot be deducted in that year.
(2021): Are maintenance payments classed as special expenses or exceptional costs?
When must all persons be specified?
The tax office assumes that all maintenance payments are distributed equally among all household members.
The maintenance payments you have made are therefore divided equally among all supported persons living in the household, even if they are not entitled to maintenance.
Example
Your father lives in a household with your sister. You pay your father 6.000 Euro and your sister nothing.
Your expenses are distributed equally between both people, i.e. since your sister is not entitled to maintenance, you can only claim the 3.000 Euro allocated to your father for tax purposes.
(2021): When must all persons be specified?
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?
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?
What is the sacrifice limit?
If you pay maintenance to relatives, you can deduct this as special extraordinary expenses. However, this only applies if the maintenance payments are 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. The sacrifice limit is therefore the limit up to which the tax office recognises your maintenance payments. The sacrifice limit does not apply if you pay maintenance to your partner living abroad or for maintenance payments to your ex-spouse or permanently separated spouse. The same applies if you pay maintenance to your destitute partner with whom you live in a shared household.
(2021): What is the sacrifice limit?
How is the sacrifice limit calculated?
The basis for calculating the sacrifice limit is your net income, which includes 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 contributions, the solidarity surcharge, and the employee allowance or work-related expenses.
The sacrifice limit is then one per cent for every full 500 Euro of net income. For spouses, the joint income is used for the calculation. However, a maximum of 50 per cent 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 also by five percentage points for your spouse, but by no more than 25 per cent 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 per cent for every full 500 Euro: 48 per cent
Less spouse: -5 per cent
Less 2 children: -10 per cent
Remaining: 33 per cent
Your sacrifice limit is therefore 33 per cent 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 9,744 Euro in 2021 also applies here, plus any contributions to health and nursing care insurance if you have paid such contributions for the maintenance recipient.
(2021): How is the sacrifice limit calculated?
