Claim storm damage for tax purposes!
Tax relief in the event of natural disasters
In July 2021, a devastating flood disaster occurred in Rhineland-Palatinate, North Rhine-Westphalia, Bavaria and Saxony, resulting in the loss of nearly 200 lives.
This led to damage amounting to billions and numerous devastated areas. The elimination of these damages incurs high financial burdens, which the tax authorities aim to support through tax relief.
Tax relief for flood victims
The finance ministries of the affected states have decided on tax relief measures, including the possibility to deduct expenses for the replacement of furniture, household items and clothing, as well as damage to owner-occupied houses, as extraordinary expenses for tax purposes.
The usual insurance options are also to be disregarded in this case, as many damages are not insured.
Further tax tips
- Expenses for the replacement of furniture, household items and clothing, as well as damage to the house, are considered as extraordinary expenses. The reasonable burden depends on income and family status.
- You can claim the direct tax deduction for craftsmen's services in accordance with § 35a EStG.
- Always declare your expenses in the year they were incurred in the tax return.
- Even if you receive donated funds, you can deduct your expenses as extraordinary expenses.
- Employees can apply for allowances for monthly income tax deductions at the tax office at an early stage.
There is also tax relief for damage to homes caused by local storms.
In principle, expenses for the repair of damage to your home can be claimed as extraordinary expenses, provided they are not covered by insurance. However, certain conditions apply.
You can claim the direct tax deduction for craftsmen's services in accordance with § 35a EStG. Make sure to obtain invoices and pay them by bank transfer.
For rented houses and flats, damage can be deducted as advertising costs.
(2023): Claim storm damage for tax purposes!
When can damage to your home be deducted?
Expenses for damage repair to an owner-occupied home can under certain conditions be deducted as extraordinary expenses in accordance with § 33 EStG, with the tax office applying a reasonable burden.
- Tax consideration is only possible for damage caused by an "unavoidable event", e.g. flooding, storm, hail, earthquake, lightning strike. Expenses for the rectification of construction defects are not recognised.
- The damage must affect an "existentially important area", particularly the home. Damage to cars or garages is not considered.
- There is no standard insurance option for the risk of damage. If the risk could have been covered by insurance, the tax deduction is excluded.
Fortunately, the tax authorities have decided that so-called elemental insurance does not constitute a generally accessible and standard insurance option (BMF letter dated 6.9.2005, BStBl. 2005 I p. 860). This means that damage caused by flooding, hail or storms can be deducted even if you do not have corresponding building insurance.
The Hamburg Fiscal Court recently ruled that expenses related to damage caused by martens to a home are not deductible. This applies at least if the marten damage does not occur acutely and in a concentrated manner, but is tolerated over a certain period or if initially ineffective means are used to scare the marten away (judgment of 21.2.2020, 3 K 28/19). An appeal against the judgment is pending before the Federal Fiscal Court, so in similar cases an objection should be lodged and reference made to the proceedings (Ref. VI B 41/20). However, the BFH has allowed an appeal in another case concerning beaver damage (Ref. VI R 42/18). To maintain or increase the chances of success, homeowners should not only prove that material damage has occurred but also use expert reports to demonstrate that health risks existed (as also recommended by Matthias Tiemann, presiding judge at the FG, EFG 2020, pp. 837/840).
The Rhineland-Palatinate Fiscal Court recently ruled that costs incurred due to legal disputes related to the construction of a home are not tax-deductible as extraordinary expenses (judgment of 7.5.2020, 3 K 2036/19).
Also, see the article "Unwetterschäden 2021 steuerlich absetzbar".
(2023): When can damage to your home be deducted?
What damage to home and household items can I claim as exceptional expenses?
Damage to your household items or clothing can be recognised as extraordinary expenses if they have been rendered unusable or lost due to a fire, theft, storm, or flood.
Condition: You must have incurred actual financial expenses; the occurrence of the damage alone is not sufficient. In the home, the main living areas, as well as bedrooms and kitchen, are particularly affected. Expenses for damage in the cellar or attic are not recognised as extraordinary expenses.
The replacement of these items must be essential, and the event that destroyed them must have been unavoidable. However, you must deduct any payments you have received from insurance or public assistance from your expenses before claiming them in your tax return.
Any residual value of the item to be replaced must be deducted; the current value counts, not the replacement value. The expenses for new purchases or repairs must be incurred no later than three years after the damage occurred.
Assets, such as paintings or expensive furniture, are excluded from reimbursement - unless they are essential items. This may apply to an expensive car if its use is indispensable for the entire family.
However, if you have not taken out household insurance against possible destruction of your household items, you cannot expect the tax office to recognise your expenses as extraordinary expenses, for example, after a fire. You must take care of the necessary protection against an unavoidable financial burden yourself. This also applies to possible protective measures against flooding, for example. However, insurance against natural hazards such as flooding or earthquakes is not among the generally accessible insurances that every homeowner must have.
You can enter the actual expenses as extraordinary expenses. However, they are not recognised in full. Your reasonable personal contribution will be deducted from this. This depends on your income, marital status, and the number of your children and is calculated by the tax office. The reasonable personal contribution amounts to one to seven percent of the total income. In any case, you should be able to prove the relevant expenses.
On 14 and 15 July 2021, a flood disaster with devastating effects occurred in Rhineland-Palatinate – particularly in the Eifel – and in North Rhine-Westphalia. On 17 July, parts of Bavaria and Saxony were also affected. At least 182 people lost their lives. Low-pressure system "Bernd" caused damage amounting to billions. Numerous places have been devastated and partially destroyed, countless people are left with nothing, having lost their belongings and seeing only the ruins of their existence.
The damage is indescribably large. Its repair leads to extraordinarily high financial burdens. The tax authorities want to help the victims and supporters with various tax relief measures. In the case of natural disasters that devastate entire regions, the tax authorities provide tax relief for the victims, which they implement on a case-by-case basis with the so-called "disaster decree".
This is also the case with the current flood disaster: The finance ministries of the states of North Rhine-Westphalia, Rhineland-Palatinate, and Bavaria, as well as other federal states, the customs authorities, and the federal government have provided various tax relief measures for the victims of the flood and for supporters.
(2023): What damage to home and household items can I claim as exceptional expenses?
