(2022) How are the costs for building modifications due to a disability taken into account?

When a family member is affected by a disability, significant alterations to the home are often necessary to allow the disabled person to continue living in their familiar surroundings despite health limitations and to avoid moving to a care home.

Such expenses for disability-related alterations can be deductible as extraordinary burdens if certain conditions are met.

Costs for shower alterations

Recently, the Baden-Württemberg tax court fully recognised the costs for shower alterations as extraordinary burdens under § 33 EStG, although a reasonable burden must be deducted. The costs for materials and labour are considered medical expenses as they directly alleviate a medical condition (Baden-Württemberg tax court, 19.3.2014, 1 K 3301/12).

A single lady suffers from multiple sclerosis and has a disability degree of 50. A care level has (not yet) been certified. She has her shower adapted for disability access in her home: the shower tray is removed and a floor-level shower element is installed, the fittings are renewed, the shower cubicle is retiled and fitted with a door. The shower is then floor-level and accessible by wheelchair.

The tax court did not deduct a value for the new shower. According to new BFH case law, in the case of disability-related alterations, the expenses are so strongly justified by the compulsion of the disability that "the acquisition of any value in view of the overall circumstances takes a back seat" (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 alterations 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 installing a lift

Expenses for installing a lift in one's own home were previously not recognised as extraordinary burdens. An elevator tower added to the existing building was also not recognised. This was justified by the fact that such a building measure is also advantageous for non-disabled people and therefore increases the value of the building.

However, according to more recent BFH case law, the question of value and marketable advantage no longer plays 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 tax court recognised the costs for installing a lift amounting to 65.000 Euro as extraordinary burdens because the installation of a cheaper stairlift was not possible for technical reasons (Cologne tax court, 27.8.2014, 14 K 2517/12, revision).

Recently, the Münster tax court ruled that expenses for creating a wheelchair-accessible path in the garden of a detached house are not necessary if there is a terrace on the other side of the house that is accessible by wheelchair. Therefore, the expenses are not deductible as extraordinary burdens. However, the labour costs can be deducted as a craftsman service at 20 percent (maximum 1.200 Euro) from the tax liability (ruling of 15.1.2020, 7 K 2740/18 E).

Expenses for medically indicated measures are typically to be considered as extraordinary burdens without the need for an individual examination of the necessity of the reason and the amount. It should also be noted that not only the medically necessary minimum provision is indicated, but any diagnostic or therapeutic procedure that is sufficiently justified.

This medical assessment must be followed in the tax evaluation unless there is an obvious disproportion between the required and actual expenditure. Even with costs of 65.000 Euro for a lift, there is no obvious disproportion between the required and actual expenditure. These costs are reasonable.

This is especially true if the installation of a cheaper stairlift was not possible for technical reasons.

The Federal Fiscal Court had already clarified that the lift is a "medical aid in the strict sense" that is purchased exclusively by sick or disabled people to alleviate their suffering. For such items, a medical certificate does not need to be obtained before purchase, as the strict requirements of § 64 para. 1 no. 2e EStDV do not apply (BFH ruling of 6.2.2014, VI R 61/12).

The full deduction in the year of expenditure can, however, be ineffective if the extraordinary burdens are higher than the total income from which they are to be deducted. In this case, the tax deductibility does not provide the desired relief effect. It would be more advantageous if high expenses could be spread over several years. However, the tax authorities refuse and state: "A distribution over several years is not permitted" (R 33.4 para. 4 and 5 EStR).

The Federal Fiscal Court has confirmed the strict stance of the tax authorities: Extraordinary burdens are generally deductible in the year in which they were incurred. High costs for disability-accessible home alterations may not be spread over several years for reasons of equity if they can only have a very limited tax effect in the calendar year in which they were incurred (BFH ruling of 12.7.2017, VI R 36/15).