Tax deduction for tradespeople possible even without rent payments

Can you receive tax savings for skilled trades services even without paying rent? The Federal Fiscal Court says yes.

This article is part of the special topic Tax bonus for tradesmen's invoices: What you should know

Expenses for home improvement services can be claimed as a tax deduction of 20 percent (up to a maximum of €1.200 per year) (§ 35a para. 3 EStG). According to the LBS Legal and Tax Information Service, this also applies if the apartment is used rent-free.

The case:

A father used the attic apartment in his mother's house as a secondary residence. When the roof needed repairs, he commissioned and paid for them. He then applied to the tax office to have the labor costs for the work recognized as a household-related service.

The tax office and the tax court refused, arguing that without a formal lease agreement, there was no obligation to renovate the roof. The case went all the way to the Federal Fiscal Court (BFH).

The verdict:

The Federal Fiscal Court (BFH) elaborated on the definition of a "household." It stated that the taxpayer must maintain a "domestic life." However, it is not necessary for the user to be an economic (co-)owner or tenant.

A household can be maintained even in rent-free accommodation. The tax deduction should not be denied simply because the mother, as a co-resident in the house, benefited from the roof renovation.

Federal Fiscal Court, case number VI R 23/21

Source: LBS

This is how the tax bonus works

20 percent of labor costs Private customers can claim up to a maximum of 6.000 euros per year for renovation and refurbishment work within their own four walls.

If the maximum amount is reached, there is a tax bonus of 1.200 euros. If the labor costs are only 2.100 euros, then the tax bonus would still be 420 euros.

Important: Only labor costs are tax-deductible, not materials. A married couple filing jointly can only claim the bonus once. This is regulated in Section 35a Paragraph 3 of the Income Tax Act (EStG).

To claim the tax credit, you must have received an invoice and transferred the amount to the tradesperson's account at a credit institution. Cash payments are also excluded.

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