How must I employ a domestic help in order to deduct the costs?

How you can claim expenses for your domestic help in your tax return depends on the basis on which your domestic help is employed. If you have employed help in a mini-job, you can claim 20 percent of the expenses, up to a maximum of 510 Euro per year, as a tax reduction.

If you have employed domestic help subject to social security contributions or hired a self-employed service provider, you can claim 20 percent of the costs, up to a maximum of 4.000 Euro per year. This also applies to care and support services. For craftsmen's services, you can claim 20 percent of the expenses, but only up to a maximum of 1.200 Euro; material costs do not reduce taxes.

If you employ domestic help subject to social security contributions, you should know the following: You need the tax identification number so that you or your tax advisor can access the electronic wage tax deduction features (ELStAM), which are stored in a file at the tax office, and calculate the monthly wage tax correctly. You must register your domestic help with the relevant health insurance company and pay the employer's share of the health insurance.

You also pay half of the contributions to unemployment and pension insurance. For the tax reduction in your tax return, both the wages and the social security contributions are accepted. You can also have household-related work carried out by a self-employed service provider and deduct 20 percent of the invoice from your taxes.

The costs for an au pair can be declared as household-related services for one half and as childcare costs for the other half. This also includes the non-cash benefits for free accommodation and meals. You can also employ domestic help on a mini-job basis to work in your private household.

You must register this employment as a mini-job with the Minijob-Zentrale - the Knappschaft Bahn See. You must use the household cheque procedure for this. The Minijob-Zentrale collects the flat-rate deductions twice a year. The deductions for the second half of the previous year are still credited to the previous year for tax purposes, even if they were not collected until January of the current year.

As the employer of the mini-jobber, you can choose whether the wages are taxed according to the electronic wage tax deduction features with monthly wage tax deduction or at a flat rate of two percent (including solidarity surcharge and church tax). In the tax return, you can declare the wages of your domestic help and the additional amounts such as flat-rate contributions and wage tax.

Even if the value of free board and lodging is not included in the calculation of the flat-rate contribution and flat-rate tax, this value is still part of your expenses for which you can claim the tax reduction. The official non-cash benefit values are decisive.

(2023): How must I employ a domestic help in order to deduct the costs?

What types of childcare costs can be claimed?

Regardless of whether they are work-related or not, you may claim up to 6,000 Euro per child in childcare costs as special expenses. The tax office covers two-thirds of this, up to 4,000 Euro.

It does not matter whether the care takes place in your home or elsewhere. The only requirement is that it involves direct care or supervision. Therefore, tutoring, piano lessons, or ballet classes are not considered childcare costs. However, the following are deductible:

• accommodation in a kindergarten, day nursery, after-school care centre, crèche, or with a childminder
• employment of childcare workers, educators, or babysitters in the household
• employment of domestic helpers and au pairs, provided they care for the child
• travel expenses for the caregiver. Also, free board and lodging if no wages are paid.
• Food for the child is not considered a childcare cost. If it is not itemised separately, it must be estimated and deducted.

Care by a relative
Even if a relative looks after your child, the costs may be deductible under certain circumstances. However, this relative must not be entitled to child benefit or the child allowance for the child and must not live in your household, otherwise the tax office will consider the supervision a favour. However, if the grandparents travel to look after their grandchildren, you can deduct the travel expenses they incur from your taxes. You should be able to provide a corresponding agreement.

If you wish to deduct childcare costs, you must not pay the money in cash, but must transfer it. The tax office may require the invoice and, if applicable, the transfer receipt as proof. A receipt from the recipient is not sufficient.

Note: If the employer provides tax-free benefits for pre-school childcare, the deduction for special expenses must be reduced by the amount of these benefits, as the deduction for special expenses requires expenses that actually and definitively burden the taxpayer financially (BFH ruling of 1.9.2021, III R 54/20).

(2023): What types of childcare costs can be claimed?

How old can my child be for me to deduct childcare costs?

Until your child's 14th birthday, you can claim childcare costs; after that, you cannot.

For disabled children, there is no age limit if the disability occurred before their 25th birthday. A disability card is sufficient as proof.

(2023): How old can my child be for me to deduct childcare costs?

How do I provide evidence of my childcare costs?

Childcare costs can be proven through invoices and the corresponding bank transfer documents. A receipt from the recipient is not sufficient! Even small amounts, such as to the babysitter, must not be paid in cash if you wish to claim the costs later.

You do not need to include the documents with your tax return, but you must present them if requested by the tax office.

(2023): How do I provide evidence of my childcare costs?

How much childcare costs can I deduct?

You can claim up to 6,000 Euro per child per year for childcare costs. The tax office deducts two-thirds of this amount, up to a maximum of 4,000 Euro, from your tax. It does not matter whether the child was cared for throughout the entire year or only for a few days.

If you are jointly assessed as a married couple, it does not matter who paid for the childcare. In the case of individual assessment, the partner who paid the costs can claim them. If this applies to both, each can claim their share up to 2,000 Euro. However, you can also agree on a different allocation.

This can also make sense, as the following example shows:

Childcare costs amount to 5,500 Euro per year. The mother pays 4,000 Euro, and the father pays 1,500 Euro per year.

If both partners do not intervene in the allocation, the following picture emerges:

Mother: 2/3 of 4,000 Euro = 2,667 Euro

Father: 2/3 of 1,500 Euro = 1,000 Euro

Total: 3,667 Euro (2/3 of 5,500 Euro)

Since each parent can claim a maximum of 2,000 Euro, the total amount both parents can claim together is 3,000 Euro.

If, for example, the father and mother agree that the mother can claim a maximum amount of 3,000 Euro and the father 2,500 Euro, they can claim 667 Euro more in childcare costs.

It becomes more complicated if you are not married. If you do not live together, the person with whom the child lives can claim the childcare costs. Single parents can claim up to 6,000 Euro, just like married couples. However, if you live with your partner without being married, you can split the childcare costs. This is particularly worthwhile if one of you earns little and therefore does not benefit from the tax advantage.

For unmarried parents, the tax office only recognises the costs of the person who signed the contract with the childcare facility. If both of you want to claim childcare costs, you should both sign the contract.

Note: The Federal Fiscal Court has confirmed that for parents living separately, the child's household membership is decisive. Section 10 (1) No. 5 EStG does not violate the Basic Law if the childcare expenses of the parent who has not taken the child into their household are covered by the allowance granted to them for childcare and education or training needs (BEA allowance under Section 32 (6) EStG) (BFH ruling of 11.5.2023, III R 9/22). However, there are numerous cases in which the so-called alternating model is practised, meaning that the child lives with the mother for part of the time and with the father for part of the time, thus having two "household memberships". Who can then claim the childcare costs? The Thuringia Finance Court has ruled that childcare costs can (only) be deducted by the person who paid them. The decisive factor is who transferred the childcare expenses to the account of the service provider, such as the kindergarten operator (Thuringia FG, judgment of 23.11.2021, 3 K 799/18). An appeal has been lodged against the judgment with the Federal Fiscal Court (Ref. III R 1/22). Corresponding cases should therefore be kept open.

Note: If the employer provides tax-free benefits for pre-school childcare, the deduction for special expenses must be reduced by the amount of these benefits, as the deduction for special expenses requires expenses that actually and definitively burden the taxpayer financially (BFH ruling of 1.9.2021, III R 54/20).

(2023): How much childcare costs can I deduct?

When can I deduct childcare costs?

You can only claim childcare costs if a parental relationship exists. This applies to biological children, as well as adopted and foster children. You cannot claim childcare costs for stepchildren and grandchildren.

Furthermore, the child must belong to your household. This is also the case if, for example, they are in a boarding school and regularly come home. It is important that there is a family home used by the child and that you are responsible for the child's welfare.

In general, you can only claim childcare costs for children under 14 years of age. This age limit is waived only for disabled children.

Note: If the employer provides tax-free benefits for pre-school childcare, the deduction for special expenses must be reduced by the amount of these benefits, as the deduction for special expenses requires expenses that actually and definitively burden the taxpayer financially (BFH ruling of 1.9.2021, III R 54/20).

(2023): When can I deduct childcare costs?

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 is the difference between employment and services?

A household-based employment relationship exists if you or the homeowners' association have employed someone to carry out household-related activities for the homeowners' association. The homeowners' association is the employer of this person.

A household-based service exists if household-related activities are carried out by a company. The homeowners' association is the client of the service.

(2023): What is the difference between employment and services?

For whom do I enter the childcare costs?

The maximum amount of 4,000 Euro applies per child, not per parent.

If you are jointly assessed as a married couple, it does not matter who paid for the care. In the case of individual assessment, the partner who incurred the costs can deduct them. If this applies to both, each may deduct their share up to 2,000 Euro. You can also agree on a different allocation.

This can also make sense, as the following example shows:

Childcare costs amount to 5,500 Euro per year. The mother incurs costs of 4,000 Euro, the father pays 1,500 Euro per year. If both partners do not intervene in the allocation, the following picture emerges:

Mother: 2/3 of 4,000 Euro = 2,667 Euro

Father: 2/3 of 1,500 Euro = 1,000 Euro

Since each parent can deduct a maximum of 2,000 Euro, the total amount that both parents can jointly deduct is 3,000 Euro.

If the father and mother agree that the mother may claim a maximum amount of 3,000 Euro and the father 1,000 Euro, they can claim 1,000 Euro more in childcare costs.

It becomes more complicated if you are not married. If you do not live together, the parent with whom the child lives may deduct the childcare costs. Single parents can claim up to 6,000 Euro, just like married couples. However, if you live with your partner without being married, you can split the childcare costs. This is particularly worthwhile if one of you earns little and therefore does not benefit from the tax advantage.

For unmarried parents, the tax office only recognises the costs of the person who signed the contract with the childcare facility. If both of you want to claim childcare costs, you should both sign the contract.

Note: The Federal Fiscal Court has confirmed that in the case of separated parents, the child's household membership is decisive. Section 10 (1) No. 5 EStG does not violate the Basic Law if the childcare expenses of the parent who has not taken the child into their household are covered by the allowance granted to them for childcare and education or training needs (BEA allowance under Section 32 (6) EStG) (BFH ruling of 11.5.2023, III R 9/22). However, there are numerous cases in which the so-called alternating model is practised, i.e. the child lives with the mother for part of the time and with the father for part of the time, and thus has two "household memberships". Who is then allowed to claim the childcare costs? The Thuringian Tax Court has ruled that childcare costs can (only) be deducted by the person who incurred them. The decisive factor is who transferred the childcare expenses to the account of the service provider, for example the kindergarten operator (Thuringian FG, judgment of 23.11.2021, 3 K 799/18). An appeal has been lodged against the judgment with the Federal Fiscal Court (Ref. III R 1/22). Corresponding cases should therefore be kept open.

Note: If the employer provides tax-free benefits for pre-school childcare, the deduction for special expenses must be reduced by the amount of these benefits, as the deduction for special expenses requires expenses that actually and definitively burden the taxpayer financially (BFH ruling of 1.9.2021, III R 54/20).

(2023): For whom do I enter the childcare costs?

What are tax-free payments under section 3 no. 33 EStG?

Employers can make tax and social security-free contributions to childcare in addition to wages. These can be benefits in kind, such as accommodation in a company kindergarten, or cash benefits, such as subsidies for a nursery or childminder. The condition is that the child is not yet of school age. In addition, the care must not take place in your own home.

If you pay the childcare costs yourself, you can only deduct two-thirds of the costs, up to a maximum of 4.000 Euro per child, as special expenses from tax. There is currently no cap for the employer's contribution. This means the employer can also fully reimburse expensive childcare facilities tax-free.

(2023): What are tax-free payments under section 3 no. 33 EStG?

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?

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

When is it a mini-job in a private household?

A mini job in a private household is when the wages do not exceed 520 Euro per month. The number of working hours is irrelevant.

Expenses for a household help in a mini job can be deducted directly from the tax liability at 20 percent, up to a maximum of 510 Euro per year. Since 2009, the maximum amount of 510 Euro is no longer reduced on a pro rata basis if the employment relationship does not last the entire year.

The employer – the private household – must pay flat-rate contributions on the wages of the household help in a mini job to the Minijob-Zentrale, namely 5 percent each for statutory pension and health insurance, and 2 percent for tax. Although not mentioned in the law, the tax benefit is only available if the employer uses the household cheque procedure to pay their flat-rate contributions to the Minijob-Zentrale.

You pay your cleaner 100 Euro per month. That makes 1.200 Euro per year. If the help is employed as a mini jobber, the tax office will deduct 20 percent of this, i.e. 240 Euro, directly from your tax liability.

(2023): When is it a mini-job in a private household?

What childcare costs cannot be deducted?

You cannot claim costs for any type of tuition as childcare costs. This also includes tutoring, but not basic homework supervision.

Expenses for “teaching special skills” (such as music lessons or computer courses) are not considered childcare costs for tax purposes.

The following items are also not deductible:

• Payments for sporting activities, e.g. membership fees for a sports club
• Expenses for school trips
• Material costs for books, toys or similar items
• Your travel expenses if you take your child to a carer or after-school club and pick them up again
• Expenses for your child's meals

(2023): What childcare costs cannot be deducted?

What is the tax reduction?

If the household help is employed as part of a mini-job with a monthly wage of up to 520 Euro, the expenses are also tax-advantaged:

The expenses are deductible up to 2,550 Euro at 20 percent, a maximum of 510 Euro per year, directly from the tax liability.

The maximum deductible amount of 510 Euro is not reduced on a pro rata basis if the employment relationship does not last the entire year.

(2023): What is the tax reduction?