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!

Natural disasters: tax relief for victims

Repeatedly, heavy rainfall and the associated flooding have caused considerable damage. Many people are left with nothing, having lost their belongings and seeing only the remnants of their existence. The damage repair will lead to significant financial burdens.

Almost always, the finance ministries of the affected federal states decide in these cases to assist those affected through tax measures to avoid undue hardship. The so-called disaster decree is then regularly enacted, granting tax relief and reductions.

In particular, those affected can deduct expenses for the replacement of furniture, household items, and clothing, as well as for damage repair to owner-occupied houses as extraordinary expenses in accordance with § 33 EStG.

Since the tax deduction for household items, clothing, and building damage in natural disasters is provided for in the disaster decree and this decree is a discretionary regulation under § 163 AO, the usual insurance requirement should exceptionally be disregarded here. The Federal Ministry of Finance already stated in 2013 that "so-called elementary insurance does not constitute a generally accessible and usual insurance option within the meaning of R 33.2 No. 7 EStR" (BMF letter dated 21.6.2013, No. VI). Therefore, tax offices are instructed not to refuse recognition of damage costs due to flooding and inundations because of a lack of elementary insurance.

Here are some important tax tips:

• For your expenses for the replacement of furniture, household items, and clothing, as well as for damage repair to owner-occupied houses, the tax office calculates a reasonable burden, which depends on the amount of your income, the number of children, and your marital status. It amounts to between 1 and 7 percent of the total income. If this reasonable burden is exceeded, every additional euro reduces taxes. Therefore, it is particularly worthwhile now to meticulously collect all receipts for medical expenses, doctor and pharmacy bills, etc.!
• For damage repair to your home, you can claim the direct deduction for craftsman services under § 35a EStG for the part of the expenses not considered as extraordinary expenses due to the reasonable burden. This means: Costs up to 6.000 Euro are directly deducted from the tax liability at 20%, a maximum of 1.200 Euro. However, only labour costs and any invoiced machine and travel costs plus the applicable VAT are considered here. ATTENTION: It is assumed in your favour that this partial amount primarily relates to wages (BMF letter dated 9.11.2016, BStBl. 2016 I p. 1213, para. 32). Be sure to get an invoice and pay it only by bank transfer!
• Always claim your expenses in the year they were incurred in the tax return. Even if you took out a loan to pay. The ongoing interest for the loan - but not the repayment instalments - can also be deducted as extraordinary expenses in subsequent years.
• If you finance the damage costs with funds you received as a gift, you can still deduct your expenses as extraordinary expenses and do not need to offset the gifted funds against them (BFH judgment of 22.10.1971, BStBl. 1972 II p. 177).
• Without waiting for the tax return, employees can have the expenses deductible as extraordinary expenses entered early at the tax office as an allowance for the monthly wage tax deduction. The entry is made in your electronic wage tax deduction features. This reduces the wage tax every month and correspondingly increases the net income. Use the form Application for wage tax reduction 2022/2023.

(2023): Natural disasters: tax relief for victims

How to calculate the reasonable burden!

The expenses that can be deducted as extraordinary burdens are reduced by the reasonable burden, particularly for medical, spa, care, and disability costs. The reasonableness limit is determined in three stages (Stage 1 up to 15,340 Euro, Stage 2 up to 51,130 Euro, Stage 3 over 51,130 Euro) based on a certain percentage of the "total income". This is between 1 and 7%, depending on marital status and number of children.

• According to previous regulations, the total reasonable burden was determined by the higher percentage as soon as the total income exceeded one of the above limits. The higher percentage was then applied to the "total income".
• In January 2017, the Federal Fiscal Court took a closer look at the law and surprisingly found that the reasonable burden had been calculated completely incorrectly. The legally specified percentage does not refer to the "total income" but only to the part of the "total income" that exceeds the respective threshold amount. For example, the percentage for Stage 3 only applies to the portion of income exceeding 51,130 Euro. The corresponding reasonable burden must be determined for each threshold amount, and the amounts calculated are then added together (BFH ruling of 19.1.2017, VI R 75/14).

The changed calculation method is already taken into account in the automated issuance of income tax assessments, and old assessments are also corrected if still legally permissible (BMF announcement of 1.6.2017).

Compared to the previous legal situation, the step-by-step calculation method results in a lower reasonable burden overall, which is deducted from the extraordinary burdens claimed. As a result, this calculation can lead to a higher tax deduction of extraordinary burdens and thus to lower income tax. Although the new regulation is clearly advantageous for the taxpayer, it also complicates the calculation again. When is the "reasonable burden" reached for the taxpayer?

To help you easily determine your reasonable burden and thus the tax-effective extraordinary burdens, use the following scheme.

For those using Lohnsteuer kompakt for your tax return, the new step-by-step calculation method is taken into account in the tax calculation.

(2023): How to calculate the reasonable burden!

Who can claim exceptional costs?

Basically, everyone! Anyone with exceptional expenses can claim them in their tax return. This reduces the income tax payable, helping to avoid undue hardship.

If a taxpayer has unavoidable major expenses compared to other taxpayers with similar income, assets, or family status, they can apply to reduce their income tax. To do this, you must enter your exceptional expenses in the tax return.

However, only expenses that exceed a reasonable burden and are actually necessary are considered. The reasonable burden is determined by the taxpayer's income, family status, and number of children.

The percentage is between one and seven per cent of the taxable annual income. If your exceptional expenses exceed this percentage, you can claim the costs in full.

Exceptional expenses can include:

• Funeral costs,
• Care costs, or
• Medical expenses.

However, divorce costs have not been deductible since 2013 due to a change in the law!

In special cases, expenses for maintenance can be considered exceptional expenses. In this case, a reasonable burden is not applied.

The care allowance can be claimed by anyone caring for a close relative. This is an annual amount that is not dependent on a reasonable burden. On the individual pages of our tax return, you will find more detailed information on the respective exceptional expenses you can claim.

A distinction is made between general and specific exceptional expenses. General exceptional expenses, such as medical and funeral costs, only have a tax-reducing effect once the reasonable personal burden has been exceeded.

Specific exceptional expenses are recognised in full, but usually up to fixed maximum amounts. These include, for example, maintenance for a dependent person or the external accommodation of an adult child for education.

(2023): Who can claim exceptional costs?

Divorce costs no longer tax deductible from 2013

"Till death do us part?" Not quite. Around one in three marriages in Germany ends prematurely. Each time, this involves significant costs for both parties. Each spouse faces the question of whether they can deduct their divorce costs as extraordinary burdens to reduce their tax. A distinction must be made between the costs of the divorce proceedings and the consequential matters.

• Until 2012, legal and court costs of a divorce could be deducted as extraordinary burdens - at least those for the actual divorce and pension rights adjustment.
• However, from 2013, the tax authorities no longer recognise divorce costs as tax-deductible - neither for the consequential matters nor for the actual divorce and pension rights adjustment. Allegedly due to a change in the law. The law now states that legal costs are generally excluded from deduction and are only exceptionally recognised for tax purposes "if the taxpayer would risk losing their livelihood and being unable to meet their basic needs in the usual manner" (§ 33 para. 2 sentence 4 EStG).
• Since 2013, the official instructions for the income tax return state: "Legal costs are no longer deductible as extraordinary burdens from 2013... The prohibition also applies to the costs of divorce / annulment of a civil partnership."
• Several tax courts have recognised divorce costs as extraordinary burdens even after the new regulation of § 33 para. 2 sentence 4 EStG from 2013. The legislator only wanted to restrict the taxpayer-friendly BFH ruling from 2011 and restore the old legal situation. This is evident from a statement by the Bundesrat in the legislative process, which aimed to limit the recognition of legal costs to the "previous narrow framework". This always included the direct costs of a divorce process (FG Rheinland-Pfalz of 16.10.2014, 4 K 1976/14; FG Münster of 21.11.2014, 4 K 1829/14 E; FG Münster of 19.6.2015, 1 V 795/15 E; FG Köln of 13.1.2016, 14 K 1861/15).

The Federal Fiscal Court has now clarified the legal uncertainty and agonising doubt as to whether divorce costs are tax-deductible from 2013 - unfortunately to the detriment of taxpayers:

From 2013, divorce costs are indeed no longer deductible as extraordinary burdens according to § 33 EStG. "Because a taxpayer does not regularly incur the expenses for divorce proceedings to secure their livelihood and basic needs" (BFH ruling of 18.5.2017, VI R 9/16).

• Since the amendment of § 33 EStG in 2013, expenses for legal proceedings (legal costs) are generally excluded from deduction as extraordinary burdens. According to § 33 para. 2 sentence 4 EStG, the prohibition on deduction does not apply if the taxpayer would risk losing their livelihood and being unable to meet their basic needs in the usual manner without the expenses.
• According to the BFH, the costs of divorce proceedings are regularly not incurred to secure the livelihood and basic needs. This can only be assumed if the taxpayer's economic livelihood is threatened. Such existential concern does not apply to divorce costs, even if remaining in the marriage would severely impair the taxpayer's life.
• Although the BFH considered divorce costs as extraordinary burdens until the amendment of § 33 EStG in 2013, this is no longer possible under the new regulation. The legislator intended to reduce the tax relevance of legal costs to a narrow framework and deliberately exclude divorce costs from deduction as extraordinary burdens.

Following this decision, legal costs related to a divorce are no longer tax-deductible: neither for consequential matters, e.g. post-marital maintenance, child matters, gain adjustment and asset settlement (as before), nor since 2013 for the actual divorce and pension rights adjustment.

BUT: The Münster Finance Court recently ruled that legal costs to obtain post-marital maintenance are deductible as income-related expenses if the maintenance recipient taxes the maintenance payments as other income according to § 22 no. 1a EStG (FG Münster of 3.12.2019, 1 K 494/18 E).

The case: The claimant and her now-divorced husband separated in 2012. They conducted family court proceedings covering the divorce, pension rights adjustment, and post-marital maintenance. In 2014, the marriage was dissolved by court order, and the claimant's former husband was ordered to make monthly maintenance payments. The woman sued for higher monthly payments against the court order. In 2015, a court settlement was reached on the maintenance amount. In her 2015 income tax return, the claimant declared other income in the amount of the maintenance payments received and claimed the legal costs (court and legal fees) for tax reduction. The tax office refused to consider them.

The judges believe that the maintenance recipient's legal costs should be considered as income-related expenses because she taxed the maintenance payments from her ex-husband under § 22 no. 1a EStG. The woman incurred the legal costs to receive (higher) income in the form of maintenance payments in the future. The maintenance payments are to be treated as taxable income under § 22 no. 1a EStG because the ex-husband, as the payer, had the option to deduct his maintenance payments as special expenses under § 10 para. 1a EStG, known as real splitting. The maintenance payments are thus fully equated with other income. Consequently, a full deduction of income-related expenses must also be possible.

(2023): Divorce costs no longer tax deductible from 2013

Are divorce costs tax deductible?

The costs of a divorce, particularly legal and court costs, were deductible as extraordinary expenses of a general nature under § 33 EStG until 2012. More precisely, only the expenses for the actual divorce proceedings and pension rights adjustment were deductible, not for ancillary divorce matters outside the compulsory joint proceedings. This includes disputes over joint assets, arrangements for spousal and child maintenance, and decisions on parental access and custody rights.

However, since 2013, divorce costs are no longer deductible as extraordinary expenses due to a change in the law and a clarifying BFH ruling. "A taxpayer does not regularly incur expenses for divorce proceedings to secure their livelihood and essential needs" (BFH ruling of 18.5.2017, VI R 9/16).

• Due to a change in the law in 2013, expenses for legal proceedings (litigation costs) are generally excluded from deduction as extraordinary expenses. The prohibition on deduction does not apply "if the taxpayer would risk losing their livelihood and being unable to meet their essential needs in the usual manner without the expenses" (§ 33 para. 2 sentence 4 EStG).
• According to the BFH, the costs of divorce proceedings are not regularly incurred to secure the livelihood and essential needs. This can only be assumed if the taxpayer's economic livelihood is threatened. Such an existential impact does not apply to divorce costs, even if remaining in the marriage would significantly impair the taxpayer's life.
• Since 2013, the official instructions for the income tax return state: "Legal costs are no longer deductible as extraordinary expenses from 2013... The prohibition on deduction also applies to the costs of divorce/dissolution of a civil partnership."

Under the new legal situation since 2013, legal costs related to a divorce are no longer tax-deductible: neither for ancillary divorce matters, e.g. post-marital maintenance, child matters, equalisation of accrued gains and asset disputes (as before), nor for the actual divorce proceedings including pension rights adjustment.

BUT: The Münster Finance Court recently ruled that legal costs to obtain post-marital maintenance are deductible as income-related expenses if the maintenance recipient taxes the maintenance payments as other income under § 22 No. 1a EStG (FG Münster of 3.12.2019, 1 K 494/18 E).

The case: The claimant and her now ex-husband separated in 2012. They conducted family court proceedings at the district court, which included the divorce, pension rights adjustment, and post-marital maintenance. In 2014, the marriage was dissolved by court order, and the claimant's former husband was ordered to make monthly maintenance payments. The woman sued for higher monthly payments against the district court's decision. In 2015, a court settlement was reached regarding the maintenance amount. In her 2015 income tax return, the claimant declared other income in the amount of the maintenance payments received and claimed the legal costs (court and legal fees) as tax-reducing. The tax office refused to consider them.

The judges believe that the legal costs should be considered as income-related expenses for the maintenance recipient because she taxed the maintenance payments from her ex-husband under § 22 No. 1a EStG. The woman incurred the legal costs to receive (higher) income in the form of maintenance payments in the future. The maintenance payments are to be treated as taxable income under § 22 No. 1a EStG because the ex-husband, as the payer, had the option to deduct his maintenance payments as special expenses under § 10 para. 1a EStG, known as real splitting. The maintenance payments are thus fully equated with other income. Consequently, a full deduction of income-related expenses must also be possible.

(2023): Are divorce costs tax deductible?

Who can claim medical expenses as exceptional costs?

Anyone who can provide evidence of medical expenses can also declare them in their tax return. You will need a receipt, an invoice and, in some cases, a medical certificate. It does not matter whether you incurred the expense for your own illness, for that of your spouse or for a child for whom you are entitled to child benefit. What counts is the date you paid the invoice, not the date it was due.

If you have medical expenses related to a commuting accident or a work accident, you should declare them as income-related expenses or business expenses. This also applies to costs incurred due to an occupational illness or retraining due to illness. The advantage is that in this case a reasonable burden is not deducted.

(2023): Who can claim medical expenses as exceptional costs?

Who can provide details of exceptional expenses?

Those with exceptional expenses can claim them in their tax return. These expenses reduce the income tax payable, helping to avoid undue hardship.

Exceptional expenses of a general nature (§ 33 EStG) include: funeral costs (after deduction of the inheritance), medical expenses, costs for pregnancy and childbirth or in certain cases, expenses for damage to house or flat (e.g. in the event of floods and other natural disasters). In special cases, expenses for maintenance or employing household help may also be considered exceptional expenses. 

For exceptional expenses under § 33 EStG, the law expects each taxpayer to bear a share of the costs themselves. Therefore, only expenses that exceed a reasonable burden and are actually necessary are taken into account. Insurance reimbursements must also be deducted.

(2023): Who can provide details of exceptional expenses?

To what extent can I claim exceptional expenses?

Here you can enter the actual expenses. However, these will not be fully recognised, as your reasonable personal liability will be deducted. This is based on your income, marital status, and the number of children you have, and is calculated by the tax office. The reasonable personal liability is between one and seven percent of total income. In any case, you should be able to prove the relevant expenses.

If your expenses are below the reasonable personal liability, it is not worth declaring the costs in the tax return.

Care allowance:
If the care-related expenses are still higher than the care allowance after deducting the personal liability, enter your care expenses as they actually occurred. However, you must then also be able to prove individually what you spent money on. In this way, you can claim more than the care allowance.

For the tax office, it does not matter when the costs were incurred, but when you paid them. You should therefore try to consolidate several expense items into one year to increase the total expenses and thus exceed the limit of your reasonable personal liability.

Is there a large dental bill due, but not until next year? However, if you could already book other expenses under extraordinary burdens for the current year, ask your dentist for an early invoice or a partial invoice. This way, you may be able to claim all expenses that exceed the reasonable liability in the tax return for the current year.

The reasonable liability is only deducted for general extraordinary burdens. Expenses listed under special extraordinary burdens remain uncut.

You can use this table to roughly calculate your reasonable personal liability:

(2023): To what extent can I claim exceptional expenses?

How is the reasonable burden calculated?

The reasonable burden depends on the amount of your income, the number of children, and your marital status. It is automatically calculated by the tax office.

Until May 2017, the tax offices calculated as follows, which later proved to be incorrect:
A reasonableness threshold is determined in three stages (Stage 1 up to 15,340 Euro, Stage 2 up to 51,130 Euro, Stage 3 over 51,130 Euro) based on a certain percentage of the "total income". This percentage is between 1 and 7%, depending on marital status and number of children. According to previous legal regulations, the total reasonable burden was determined by the higher percentage once the total income exceeded one of the above limits. The higher percentage was then applied to the "total income".

Mr Stenzel is married, has two children, and a total income of 60,000 Euro. For a spa treatment, he has to pay 4,000 Euro after reimbursement from the health insurance.

Deductible as extraordinary expenses: 4,000 Euro
The reasonable burden is: 4% of 60,000 Euro = 2,400 Euro
Tax reduction effect: 4,000 Euro - 2,400 Euro = 1,600 Euro

Since June 2017, a new multi-stage calculation method has applied for the calculation of the reasonable burden due to a new BFH ruling: Only the part of the total income that exceeds the respective stage limit is subject to the higher percentage. For example, the percentage for Stage 3 only applies to the portion of income exceeding 51,130 Euro. The corresponding reasonable burden is determined for each stage limit, and the amounts determined are then added together (BFH ruling of 19.1.2017, VI R 75/14).

Married couple with 2 children and a total income of 60,000 Euro. Medical expenses amount to 5,000 Euro.

Deductible as extraordinary expenses: 5,000 Euro
The reasonable burden is:

• up to 15,340 Euro: 2% 306.80 Euro
• up to 51,130 Euro: 3% 1,073.70 Euro
• up to 60,000 Euro: 4% 354.80 Euro

total: 1,735.30 Euro
Tax reduction effect: 5,000 Euro - 1,735 Euro = 3,265 Euro
Advantage over previous calculation: 665 Euro

Due to the step-by-step calculation method, there is - compared to the previous legal situation - a lower total reasonable burden, which is deducted from the claimed extraordinary expenses. As a result, this calculation can lead to a higher tax deduction of extraordinary expenses - and thus to a lower income tax. Although the new regulation is clearly advantageous for the taxpayer, it also leads to a complication in the calculation.

The Federal Ministry of Finance accepts the new BFH ruling of 19.1.2017 (VI R 75/14) - from 1.6.2017 in all still open tax cases. The change has now been taken into account in the automated issuance of income tax assessments, and the assessments for previous years have also been largely amended, as far as procedurally possible.

(2023): How is the reasonable burden calculated?

Can I claim maintenance payments for children over 18?

If you are not entitled to child benefit or allowances for your adult child, you can also claim your maintenance payments for your child in need as extraordinary expenses for the relevant months.

The maximum deductible maintenance amount in 2023 is 10,908 Euro.

(2023): Can I claim maintenance payments for children over 18?

What are exceptional expenses?

Extraordinary expenses of a general nature (§ 33 EStG) include:

• Care and support services,
• Costs for residential care
• Expenses for the maintenance of a dependent person
• Other extraordinary expenses, such as
• Medical expenses
• Expenses for aids and remedies
• Costs related to pregnancy and childbirth
• Expenses for damage to house or flat (natural disasters)
• Funeral costs

Important: For extraordinary expenses under § 33 EStG, the legislator expects every taxpayer to bear a share of the costs themselves. Therefore, only expenses that exceed the reasonable burden and are actually necessary are taken into account.

(2023): What are exceptional expenses?