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 deaths of nearly 200 people.
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 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 claim your expenses in the tax return for the year in which they were incurred.
- Even if you receive donated funds, you can deduct your expenses as extraordinary expenses.
- Employees can apply to the tax office for allowances for monthly income tax deductions 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.
Claim storm damage for tax purposes!
Damage to your home: When is it tax deductible?
Expenses for damage repair to an owner-occupied home can be claimed for tax purposes as exceptional costs under section 33 of the Income Tax Act, subject to certain conditions. A reasonable personal contribution is deducted.
Conditions for deduction:
- Unavoidable event: The damage must have been caused by an unforeseeable and unavoidable event such as flooding, storms, hail, earthquakes, or lightning strikes. Building defects or self-inflicted damage are not recognised.
- Essential area: The damage must affect the home or other essential areas. Damage to cars or garages is not considered.
- No insurance option: If the risk of damage could be covered by insurance, a tax deduction is excluded. However, elemental insurance is not considered a generally accessible insurance (BMF letter dated 6.9.2005, BStBl. 2005 I p. 860). This means that damage caused by flooding, storms, or hail can be deducted even if no corresponding insurance is in place.
Important rulings:
- Damage caused by martens: The Hamburg Tax Court ruled that expenses for repairing damage caused by martens are not deductible if the damage was not acute but tolerated over a longer period (judgment of 21.2.2020, 3 K 28/19). An appeal against the non-admission of the appeal is pending at the Federal Fiscal Court (Ref. VI B 41/20).
- Pollution: The Baden-Württemberg Tax Court ruled that renovation due to high pollution levels in the home can be deducted as an exceptional cost if the measures are necessary and verifiable (judgment of 1.2.2024, 1 K 1855/21). In the specific case, the deduction was denied because the claimant not only carried out necessary renovations but also demolished and rebuilt the house. In addition, the evidence (reports, medical certificates) was deemed insufficient.
- Legal disputes: Costs related to legal disputes during the construction of a home are not exceptional costs and therefore not tax-deductible (Rhineland-Palatinate Tax Court, judgment of 7.5.2020, 3 K 2036/19).
Practical tips:
- Prior reports: Before starting renovation work, homeowners should ensure they can provide sufficient evidence (medical certificates, technical reports) to prove the necessity and inevitability of the measures.
- Independent evidence procedure: In case of uncertainty, it may be advisable to initiate an independent evidence procedure in accordance with section 155 FGO in conjunction with sections 485 ff. ZPO to secure the evidence for the tax office.
- Insurance cases: Always check whether the risk of damage is covered by insurance. If so, a tax deduction is excluded.
Further information on tax deduction options for storm damage can be found in the article: Unwetterschäden 2021 steuerlich absetzbar.
Damage to your home: When is it tax deductible?
What damage to household and personal 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. Particularly affected in the home are important living areas such as bedrooms and kitchens. 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 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 also 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 provide 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, these 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 remediation leads to extraordinarily high financial burdens. The tax authorities want to help those affected and their supporters through various tax relief measures. In the case of natural disasters that devastate entire regions, the tax authorities provide tax relief for those affected, 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 those affected by the flood and for supporters.
What damage to household and personal items can I claim as exceptional expenses?
