Caution: Household services are not always deductible

Costs that you have already declared as income-related expenses, business expenses, special expenses, or extraordinary expenses in your tax return cannot also be deducted as household-related services.

You cannot choose how to deduct the costs. If the costs are considered income-related expenses or special expenses, they must be declared as such, the same applies to extraordinary expenses. This applies, for example, to childcare costs, which cannot be deducted as household-related services, even if the maximum amount for childcare costs has already been exceeded.

Also, personal services, such as for a hairdresser or cosmetic treatment, are not considered household-related services, even if they take place in your home.

Services listed in the care insurance service catalogue can, however, be declared.

Not eligible are works that are not carried out in your private household, for example, if you take your laundry to a dry cleaner.

Craftsman services for which you receive insurance benefits after a claim (e.g. household or building insurance) cannot be claimed in the tax return. Insurance benefits that you will receive later must also be included.

There is also no tax deduction for household-related services that do not take place in your private household. This includes, for example, the cleaning of an off-site office, a second home, or your company. Such expenses are considered business expenses or income-related expenses. However, costs for a cleaner who works both in a home office and in your private home can be apportioned on a time basis. The business part is considered business expenses or income-related expenses, the private part as household-related services.

If household-related services are carried out both on private property and on public land, this activity is fully tax-privileged according to a BFH ruling. This applies, for example, to snow clearing on public pavements, but not on public roads. The costs for winter services in front of your own property can therefore be deducted from the tax liability at 20 percent (BFH ruling of 20.3.2014, VI R 55/12).

However, in 2020 the BFH ruled that expenses for street cleaning in front of the property are not tax-privileged as household-related services according to § 35a para. 2 sentence 1 EStG (BFH ruling of 13.5.2020, VI R 4/18).

Recently, the Federal Ministry of Finance published the following overview on the BFH's case law (BMF letter of 1.9.2021, IV C 8 - S 2296-b/21/10002 :001):

In addition, the BMF stipulates: For craftsmen's services provided by public authorities, which benefit not only individual households but all households involved in the public measures, a benefit under § 35a EStG is excluded. In this respect, there is no spatial-functional connection between the craftsmen's services and the household of the individual property owner. This applies, for example, to the expansion of the general supply network or the development of a road. This position corresponds to the BFH ruling of 28.4.2020 (VI R 50/17).

(2023): Caution: Household services are not always deductible

Can I also claim the tax reduction as a tenant?

Yes, because you do not need to own the flat to claim the expenses.

Taxpayers who wish to claim tax reductions for household-related services or tradesmen's services do not need to be the client of the measure carried out. Therefore, tenants can also claim costs for services commissioned by the landlord and paid by them as part of the service charges.

If the landlord has commissioned household-related services and tradesmen's services, tenants can claim the amounts paid for service charges as tax-reducing, also within the specified maximum amounts.

With the service charge statement for the flat, you can save a lot of tax, as many items can reduce the tax burden as household-related services or tradesmen's services. For service charges, this mainly concerns the items

• Garden maintenance
• House cleaning
• Caretaker activities
• Chimney sweep fees
• Lift maintenance.

To claim their entitlement with the tax office, the tenant needs a certificate from the landlord containing the required information. The "normal" service charge statement usually does not contain the necessary information. The tenant is entitled to receive a corresponding certificate.

Note: If you are renting, you can also claim tax benefits for household-related employment or tradesmen's services if these were commissioned by you and carried out in your flat.

The Federal Fiscal Court recently confirmed that tenants can claim expenses for household-related services and tradesmen's services in accordance with § 35a EStG to reduce tax, even if they have not personally concluded the contracts (BFH ruling of 20.4.2023, VI R 24/20). In the event that the tax office requests proof, it is advisable to request a certificate from the landlord in accordance with Appendix 2 of the BMF letter dated 9.11.2016.

If the landlord refuses to provide the certificate or requests additional proof, such as copies of tradesmen's invoices, reference can be made to the right to inspect documents, which exists according to § 259 para. 1 BGB in accordance with the established case law of the Federal Court of Justice. The tenant can inspect, photograph, scan or copy the documents. For price-controlled residential tenancies, § 29 para. 2 sentence 1 of the Regulation on the Determination of the Permissible Rent for Price-Controlled Dwellings even allows copies to be made against reimbursement of costs (BGH ruling of 8.3.2006, VIII ZR 78/05).

(2023): Can I also claim the tax reduction as a tenant?

Requirements for all tax reductions

The service must have been performed in the taxpayer's household. This condition is not met, for example, in the case of

• care and support for sick, elderly, and dependent persons in a day care facility,
• repair of household items at the repair company's premises,
• waste collection (the processing or disposal of waste takes place outside the household)

The household must be located in the European Union or the European Economic Area. If the taxpayer's expenses relate to multiple households (e.g. main residence and holiday home), the maximum amount is deductible only once in total.

Not eligible are expenses that have already been taken into account for tax reduction under other provisions of the Income Tax Act as business expenses, income-related expenses, special expenses, or extraordinary burdens.

Special feature for homeowners: Homeowners who use their own property receive the tax reduction even if the community or the administrator is the employer or client. This is done proportionally according to their co-ownership share.

The costs for waste collection cannot currently be considered as a household-related service in your tax return. This is based on a ruling by the Cologne Tax Court on 26 January 2011 (4 K 1483/10, EFG 2011 p. 978 no. 11).

The reason for this is that the main service is not provided within your property boundaries. The actual service is not the collection of the waste, but its subsequent disposal and processing. The emptying and transport of the waste are considered supporting activities. The Münster Tax Court recently confirmed this view (ruling of 24 February 2022, 6 K 1946/21 E). However, an appeal was rejected for procedural reasons, not on substantive grounds. This means that the issue has not yet been definitively clarified.

(2023): Requirements for all tax reductions

Which expenses are eligible?

Eligible expenses include gross wages or salary (for "mini-jobs") and the social security contributions paid by the employer, wage tax including the solidarity surcharge and church tax, accident insurance contributions, and levies under the Expense Reimbursement Act (U 1 and U 2).

(2023): Which expenses are eligible?

What evidence is required?

To receive the tax reduction, you must observe one condition:

You must obtain an invoice from the service provider as proof of expenditure, and you may only pay this invoice by bank transfer to their account. Ensure that the invoice separates labour and material costs. Only labour costs, as well as machine and travel costs including the VAT on them, are eligible for tax benefits. However, VAT does not need to be shown separately; you may add it to the labour costs.

It is not necessary to attach the bank statement to the tax return. However, in case of doubt, the tax officer may request it. Amounts paid by standing order, direct debit, or online banking are recognised in conjunction with the bank statement. Cash payments are not recognised.

The condition of bank transfer still applies. Invoices paid in cash will not be recognised.

Household-related services also include home care and support for persons in need of care by mobile care services or self-employed carers. Since 2009, it is no longer necessary to prove the need for care and a care level (until 2016) or a care grade (from 2017).

If you do not yet have a current service charge statement or a separate certificate according to § 35 a EStG for 2023 from your property management, this is not a problem. It is permissible to claim the total expenses for the tax year in which the statement is received by the tenant. You therefore take the most recent service charge statement you have – presumably from 2022 – and claim these costs in the tax year 2023. All tenants and property owners who have not yet received the current certificate according to § 35 a EStG for 2023 can proceed in this way!

All private individuals who have commissioned craftsmen or service providers claim the expenses in the tax year in which they paid the corresponding invoice themselves.

In 2019, the Federal Fiscal Court unfortunately ruled against the generous stance of the tax authorities that the tax reduction according to § 35a EStG is only granted for expenses incurred by a taxpayer for their own accommodation in a home or for their own care. However, the tax benefit is excluded for expenses incurred for another person, i.e. when children cover the costs for their parents (BFH ruling of 3.4.2019, VI R 19/17).

A few months after the BFH ruling, the Berlin-Brandenburg Fiscal Court also dealt with the assumption of care costs for a parent. This time, however, it was not about covering the costs for inpatient care, i.e. accommodation in a home, but about covering the costs for outpatient care. The FG ruled as follows: § 35a EStG favours - if at all - only expenses for the outpatient care of relatives in the taxpayer's own household (i.e. the carer's), not for the outpatient care of relatives in their household (BFH ruling of 11.12.2019, 3 K 3210/19). However, a revision was explicitly allowed at that time. And now the positive ruling of the BFH is available.

Currently, the Federal Fiscal Court has ruled as follows: The tax reduction according to § 35a para. 2 sentence 2 first half-sentence EStG can also be claimed by taxpayers who incur expenses for the outpatient care and support of a third party. Consequently, children can deduct the costs for outpatient care of their parents if they have borne the costs. This also applies if the care and support services are not provided in the taxpayer's own household but in the household of the person being cared for or supported (BFH ruling of 12.4.2022, VI R 2/20).

However, the BFH also complicates matters, as it upholds its above-mentioned ruling from 2019. It distinguishes between covering the costs for inpatient care (= still not deductible) and covering the costs for outpatient care (= deductible), where in the second case it depends on who concluded the care contract. Only if the payer, usually daughter or son, is contractually obliged, i.e. pays on their own debt, are the costs deductible. If, on the other hand, payment is made on the debt of the person being cared for, i.e. father or mother, because they concluded the care contract, it is a tax-irrelevant third-party expense.

(2023): What evidence is required?

What are household-related services?

Household-related service is a term from income tax law. The expenses for such a service can lead to a tax reduction. The legal basis can be found in § 35a EStG.

A distinction is made between household-related employment, household-related services, and craftsmen's services.

Depending on the classification of the service, different maximum amounts apply for consideration.

Household-related employment

Household-related employment exists when a person not belonging to the household carries out an activity in a private household that would usually be done by household members, such as shopping, cooking, baking, sewing, washing, cleaning, caring for children and the elderly, gardening.

Social security employment in a private household always exists if

• the wages from the employment exceed 520 Euro per month, or
• several mini-jobs together exceed the limit of 520 Euro per month.

Activities as a chauffeur, secretary, or companion are not eligible.

Household-related services

Household-related services must have been carried out by a self-employed service provider or a service agency. Eligible services include, for example:

• cleaning the apartment, cleaning windows, cleaning the stairwell and other communal areas,
• garden maintenance (e.g. mowing the lawn, trimming hedges),
• services for moves by private individuals (minus reimbursements from third parties).

Craftsmen's services

As part of craftsmen's services, all expenses for renovation, maintenance, and modernisation measures for the apartment used for own residential purposes (condominium, house, rented apartment) are eligible. These include, for example:

• work on interior and exterior walls,
• work on the roof, facade, garages, etc.,
• repairs or replacement work on windows and doors,
• painting, repairs, and replacement work on doors, windows (inside and outside), fitted cupboards, fitted kitchens, radiators and pipes,
• repairs and replacement work on floor coverings (e.g. carpet, parquet, tiles),
• repairs, maintenance, or replacement work on heating systems, electrical, gas, and water installations by electricians and plumbers,
• modernisation work in the bathroom,
• repairs and maintenance work on items in the taxpayer's household (e.g. washing machine, dishwasher, cooker, television, personal computer),
• garden design measures (e.g. paving work, new garden layout),
• paving work on the residential property,
• inspection work (e.g. chimney sweep, lightning protection, fire extinguishers and alarms).

(2023): What are household-related services?

How much tax can I save through household-related services and tradesmen's bills?

Depending on the type of employment and work, household-related services are subsidised differently in the tax return. The expenses can be taken into account for tax reduction as follows, depending on their type:

20 percent, maximum 510 Euro

• for household help in marginal employment (Minijob),

20 percent, maximum 4.000 Euro

• for household help in employment subject to social insurance,
• for care and support services (also in nursing homes)
• for household-related services in self-employment.

20 percent, maximum 1.200 Euro

• for craftsmen's services, but only wages and travel costs plus VAT, not material costs.

Your expenses for household help, household-related services and craftsmen's services are deducted directly from the tax liability at 20 percent.

If you pay no or very little income tax, unfortunately you have no possibility of tax reduction through household-related services or craftsmen's services.

The maximum amounts for the individual services are not reduced pro rata if the service is not provided for the whole year. For example, if you employed a cleaner for only a few months of the year, the wages paid will still be deducted from the tax liability at 20 percent, up to the maximum amount.

On the other hand, you cannot claim the expenses for household-related services more than once. Exception: You share the costs for the care of a person with others. However, you cannot claim double the maximum amount for two cleaners, even if you have several households in different flats.

The tax office counts several households in different flats as one household. If you and your spouse choose individual assessment, each partner is entitled to half the maximum amount for the respective household-related service. However, you can also apply for a different proportional allocation. Even if you are unmarried and living together, you can only claim half the maximum amount for yourself. In total, the maximum amount for the tax deduction is therefore only available once per household.

Mr Schmitt has his house renovated (cost: 6.000 Euro incl. VAT), employs a cleaner in marginal employment (4.800 Euro) and has a gardener (1.200 Euro incl. VAT) as well as a care service for his mother, who lives with him in the household (4.000 Euro incl. VAT). Through these expenses, Mr Schmitt saves income tax as follows:

• Deduction for renovation (20 percent of 6.000 Euro, max. 1.200 Euro): 1.200 Euro
• Deduction for cleaner (20 percent of 4.800 Euro, max. 510 Euro): + 510 Euro
• Deduction for gardener and care service (20 percent of 5.200 Euro, max. 4.000 Euro): + 1.040 Euro

Total tax deduction 2.750 Euro

This amount is deducted from the income tax. Mr Schmitt may receive a refund from the tax office if his advance wage or income tax payments are higher.

(2023): How much tax can I save through household-related services and tradesmen's bills?

Can I also claim tax relief for assisting a person in need of care?

Yes and no. For the care of a person in need of care in your household, you can claim 20 percent of the costs, up to a maximum of 4,000 Euro (§ 35a EStG). You can deduct the care costs if the person being cared for is yourself or your spouse. In the past, the tax authorities also allowed the deduction of costs for the care of parents, even if they did not belong to your household. However, the Federal Fiscal Court (BFH) rejected this (BFH ruling of 3.4.2019, VI R 19/17).

Eligible services include basic care, i.e. direct care for the person (personal hygiene, nutrition, and mobility) or supervision. The tax relief is only granted if the care and supervision are carried out in the household of the carer or the person being cared for. This can also be a household in a residential home or nursing home. The tax relief is household-related. So if two people in need of care are looked after in one household, the tax relief is only granted once. Care and support services also exceptionally include personal services, provided they are listed in the care insurance service catalogue, e.g. hairdressing, cosmetics, manicure, pedicure.

Depending on the amount of your costs, it may be worthwhile to forgo the care allowance. This is always worthwhile if 20 percent of your care expenses exceed this allowance. In this way, you can potentially deduct up to 4,000 Euro of care costs directly from your tax liability.

In 2019, the Federal Fiscal Court unfortunately decided - against the generous stance of the tax authorities - that the tax reduction according to § 35a EStG is only granted for expenses incurred by a taxpayer for their own accommodation in a home or for their own care. However, the tax advantage is excluded for expenses incurred for another person, i.e. when children cover the costs for their parents (BFH ruling of 3.4.2019, VI R 19/17).

A few months after the BFH ruling, the Berlin-Brandenburg Finance Court also dealt with the assumption of care costs for a parent. This time, however, it was not about covering the costs for inpatient care, i.e. accommodation in a home, but about covering the costs for outpatient care. The Finance Court decided as follows: § 35a EStG favours - if at all - only expenses for the outpatient care of relatives in the taxpayer's own household (i.e. the carer's), not for the outpatient care of relatives in their household (BFH ruling of 11.12.2019, 3 K 3210/19). However, a revision was explicitly allowed at that time. And now the positive ruling of the BFH is available.

Currently, the Federal Fiscal Court has ruled as follows: The tax reduction according to § 35a para. 2 sentence 2 first half-sentence EStG can also be claimed by taxpayers who incur expenses for the outpatient care and supervision of a third party. Consequently, children can deduct the costs for outpatient care of their parents if they have borne the costs. This also applies if the care and support services are not provided in the taxpayer's own household but in the household of the person being cared for or supervised (BFH ruling of 12.4.2022, VI R 2/20).

However, the BFH also complicates matters, as it upholds its above-mentioned ruling from 2019. It distinguishes between covering the costs for inpatient care (= still not deductible) and covering the costs for outpatient care (= deductible), whereby in the second case it depends on who concluded the care contract. Only if the payer, usually a daughter or son, is contractually obliged, i.e. pays on their own debt, are the costs deductible. However, if payment is made on the debt of the person being cared for, i.e. father or mother, because they concluded the care contract, it is a tax-irrelevant third-party expense.

In 2021, the care allowance for home care with care level 4 or 5 was doubled and an allowance for care levels 2 and 3 was introduced. The allowance is:

• for care level 2: 600 Euro
• for care level 3: 1.100 Euro
• for care level 4 or 5 or helplessness: 1.800 Euro can only be deducted to the extent that the person in need of care cannot bear the care costs themselves.

(2023): Can I also claim tax relief for assisting a person in need of care?