Costs for shower renovation
Current the Baden-Württemberg tax court recognised the costs for converting the shower in full as extraordinary expenses in accordance with § 33 EStG, although a reasonable burden must be deducted. The costs for materials and labour are medical expenses as they directly alleviate an illness (FG Baden-Württemberg, 19.3.2014, 1 K 3301/12).
The case: A single lady suffers from multiple sclerosis and has a disability degree of 50. A care level has (not yet) been certified. She has the shower in her home converted to be disabled-friendly: The shower tray is removed and a floor-level shower element is installed, the fittings are renewed, the shower cubicle is re-tiled and fitted with a door. The shower is then accessible at floor level and wheelchair accessible.
The tax court did not deduct any value for the new shower. According to the new BFH case law, in the case of disability-related modifications, the expenses are so strongly justified by the compulsion of the disability "that the acquisition of any value is of secondary importance in view of the overall circumstances" (BFH ruling of 24.2.2011, BStBl. 2011 II p. 1012).
Furthermore, a marketable advantage is also disregarded: "A value that is based solely on the possible use of the modifications by non-disabled family members is not a real value and is therefore unsuitable to justify a prohibition on deduction" (BFH ruling of 22.10.2009, BStBl. 2010 II p. 280).
Costs for shower renovation
Costs for installing a lift
Expenses for installing a lift in a private home were previously not recognised as exceptional costs. This also applied to the addition of a lift tower to an existing building, as such construction measures were considered to increase value, which could also benefit non-disabled individuals.
However, according to more recent case law of the Federal Fiscal Court (BFH), the equivalent value and a possible market advantage no longer play a significant role (BFH ruling of 22.10.2009, BStBl. 2010 II p. 280; BFH ruling of 24.2.2011, BStBl. 2011 II p. 1012).
The Cologne Fiscal Court recently recognised the costs of 65,000 Euro for installing a lift as exceptional costs, as the installation of a cheaper stairlift was not possible for technical reasons (FG Cologne, ruling of 27.8.2014, 14 K 2517/12).
In principle, expenses for medically indicated measures are deductible as exceptional costs without the need to check the compulsion of the measure or the costs in each individual case. The decisive factor is that the measure is medically justified – it does not have to be limited to minimum provision.
The tax assessment follows the medical necessity, unless there is an obvious disproportion between the costs and the required expenditure. In the case of the 65,000 Euro for the lift, there was no such disproportion, especially as the installation of a cheaper stairlift was technically not feasible.
The Federal Fiscal Court has also determined that a lift is considered a "medical aid in the strict sense" used exclusively by sick or disabled persons to alleviate their suffering. No prior medical certificate is required for such aids (BFH ruling of 6.2.2014, VI R 61/12).
Note: A full tax deduction in the year of expenditure may be ineffective if the exceptional costs exceed the income from which they are to be deducted. In this case, the tax relief effect is lost. The tax authorities do not allow the costs to be spread over several years (R 33.4 paras. 4 and 5 EStR).
The Federal Fiscal Court has confirmed this strict regulation: Exceptional costs can only be claimed for tax purposes in the year in which they are incurred. It is not possible to spread high costs, such as for disability-friendly home modifications, over several years, even if the costs are only partially effective for tax purposes in the year of payment (BFH ruling of 12.7.2017, VI R 36/15).
Costs for installing a lift
Can high renovation costs be spread over five years?
Disabled individuals often face very high expenses that healthy individuals do not have. This is particularly true for adapting the living environment for disability needs, such as barrier-free modifications in the home, installation of a stair lift, addition of a lift, construction of a wheelchair ramp, vehicle conversion, etc.
As these are unavoidable expenses, they can be deducted as general extraordinary expenses under section 33 of the Income Tax Act, subject to a reasonable burden. Due to the tax cash principle, the expenses must be fully declared in the year of payment in the tax return.
However, the full deduction in the year of expenditure may be ineffective if the extraordinary expenses exceed the total income from which they are to be deducted. In this case, the tax deductibility does not provide the desired relief effect. For this situation, the Federal Fiscal Court suggested a leniency regulation (section 163 of the Fiscal Code): Affected individuals should have the option to spread the high expenses over several years (BFH ruling of 22.10.2009, VI R 7/09).
However, the tax authorities are resistant and still state in the 2015 income tax guidelines:
"A distribution over several years is not permitted" (R 33.4 paras. 4 and 5 EStR). Unfortunately, the Federal Fiscal Court confirmed the strict stance of the tax authorities and ruled that extraordinary expenses are generally deductible in the year they are incurred. High costs for disability-friendly home modifications cannot be spread over several years for reasons of leniency if they have only a very limited tax effect in the calendar year in which they were incurred (BFH ruling of 12.7.2017, VI R 36/15).
Can high renovation costs be spread over five years?
