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!

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 their own home 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 represents an equity regulation according to § 163 AO, the usual insurance option requirement should be disregarded here as an exception. 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 the 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 your own home, the tax office calculates a reasonable burden, which depends on 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 costs, etc.!
• For damage repair to your home, you can claim the direct deduction for craftsman services according to § 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 increases the net income accordingly. Use the form Application for wage tax reduction 2022/2023.

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 threshold is measured 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 stipulated 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 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 overall reasonable burden, 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.

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. This includes, for example, maintenance for a dependent person or the external accommodation of an adult child for training purposes.

Who can claim exceptional costs?

Are divorce costs tax deductible?

Until 2012: Deductibility of Divorce Costs

Until 2012, divorce costs – particularly legal and court fees – could be deducted as extraordinary expenses under § 33 EStG. However, only the costs for the actual divorce proceedings and pension rights adjustment were deductible. Costs for subsequent divorce matters, such as maintenance or custody arrangements, were not deductible.

From 2013: Change in Legal Situation

Since a change in the law in 2013, divorce costs are generally no longer tax-deductible as extraordinary expenses. This applies to both the divorce proceedings and the pension rights adjustment, as well as all subsequent divorce matters. The legislator generally excluded the tax deductibility of legal costs. An exception applies only if the expenses are necessary to secure the taxpayer's livelihood (§ 33 para. 2 sentence 4 EStG).

BFH Ruling of 2017

In 2017, the Federal Fiscal Court (BFH) clarified that divorce costs generally do not affect the livelihood. Even if a divorce significantly impacts life, this is not considered a threat to the economic livelihood (BFH ruling of 18.05.2017, VI R 9/16).

No Deductibility of Divorce Costs from 2013

Since 2013, divorce costs are completely non-deductible, including all subsequent divorce matters such as maintenance arrangements, equalisation of accrued gains, or asset settlements. The official instructions for the tax return explicitly state that legal costs related to a divorce are no longer recognised as extraordinary expenses.

Legal Costs for Post-Marital Maintenance

A notable ruling by the Münster Finance Court in 2019 briefly raised hopes that legal costs to enforce post-marital maintenance could be deductible as income-related expenses if the recipient of the maintenance payments agrees to income splitting. With income splitting, the maintenance payer can deduct maintenance payments as special expenses, while the recipient taxes them as other income (§ 22 No. 1a EStG).

However, the Federal Fiscal Court overturned this ruling in an appeal. Legal costs to obtain or increase post-marital maintenance are therefore not deductible as income-related expenses, even if the maintenance payments are taxed under income splitting (BFH ruling of 18.10.2023, X R 7/20).

Conclusion

Since 2013, divorce costs and related legal costs are no longer tax-deductible. This applies to both the actual divorce and subsequent divorce matters such as maintenance, equalisation of accrued gains, or custody. Legal costs to enforce post-marital maintenance are also not deductible as income-related expenses following a recent BFH ruling, even if the maintenance recipient taxes the payments under income splitting.

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 your spouse's illness or for a child for whom you are entitled to child benefit. What counts is the date you paid the invoice, not the date the invoice 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.

Who can claim medical expenses as exceptional costs?

Who can provide information on exceptional costs?

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 offset.

Who can provide information on exceptional costs?

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 depends 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:

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 limit is measured in three stages (Stage 1 up to 15,340 Euro, Stage 2 up to 51,130 Euro, Stage 3 over 51,130 Euro) according to a certain percentage of the "total income". This is between 1 and 7% depending on marital status and number of children. According to previous legal regulations, the total amount of the reasonable burden is determined by the higher percentage once the total income exceeds one of the above limits. The higher percentage is 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-reducing 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. For each stage limit, the corresponding reasonable burden is determined, and the amounts calculated 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-reducing 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 overall reasonable burden, which is deducted from the extraordinary expenses claimed. 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.

How is the reasonable burden calculated?

Can I claim maintenance payments for children over 18?

Yes, you can claim maintenance payments for adult children if you are not entitled to child benefit or the corresponding allowances. The condition is that the child is in need, meaning they have little or no income of their own. If their own income exceeds 624 Euro per year, the deductible amount will be reduced.

No entitlement to child benefit

Maintenance payments can only be claimed for months in which there is no entitlement to child benefit or child allowances. This also applies if the child is in initial training, provided that the need is proven.

Maximum amount for maintenance payments 2024

The deductible maximum amount for maintenance payments in 2024 is 11,784 Euro. Income and earnings of the child that exceed this amount reduce the deductible maintenance payments.

Can I claim maintenance payments for children over 18?

What are exceptional costs?

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

• Care and support services,
• Costs for residential care
• Expenses for supporting 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 law expects every taxpayer to bear a share of the costs themselves. Therefore, only the expenses that exceed the reasonable burden and are actually necessary are taken into account.

What are exceptional costs?