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Read aloud:
Can a tradesman's service be deducted from taxes even if it is only partially performed in the home and the rest in the workshop? Only if the customer provides a detailed invoice.
Can I deduct the invoice from my taxes? This is a question consumers always ask themselves when they hire a tradesman. The good news is: anyone who uses tradesmen's services can look forward to a subsidy from the tax office. The tax office contributes 20 percent of the costs incurred. A maximum of €1.200 per year can be deducted directly from the income tax liability.
However, only labor costs may be included in the calculation of the tax reduction, not material costs. The portion of the invoice attributable to, for example, tiles, wallpaper, or paint is not taken into account. Therefore, the customer requires an invoice that separately lists the materials and labor costs.
Another special feature is that the work is performed in the taxpayer's domestic household. Therefore, a repair in the tradesman's workshop is just as exempt as a renovation in a holiday home in Mallorca.
Courts must repeatedly address contentious borderline issues. This was the case with the Nuremberg Finance Court, which considered whether tax relief is also possible if the work is performed partly in the customer's workshop and partly in the customer's home. This is possible, the court ruled. But: In such cases, the customer must submit a detailed invoice with their tax return, showing exactly how much of the work was paid for on-site assembly!
Tip: In such cases, customers should ask their tradesman to not only show the material and labor costs separately in the invoices, but also
also to divide the labor costs into "out-of-home expenses" and those incurred locally in the taxpayer's household.
A married couple had their front door replaced and commissioned a carpenter to do the work. The carpenter first fabricated the front door in their workshop and then installed it in their house. The invoice listed the total costs separately for material costs and labor costs for the manufacture and installation of the front door.
Operations management
Operations management
The couple's tax advisor claimed a portion of the labor costs in their income tax return under Section 35a, Paragraph 3 of the Income Tax Act (EStG). He estimated the portion of the labor costs for the on-site installation of the front door.
The tax office denied the tax reduction because it lacked proof of what portion of the work was for the manufacture of the door and what portion was for the installation. The objection filed against this decision was unsuccessful.
The Nuremberg Finance Court ruled in favor of the tax office. The tax credit for tradesmen's services requires that they be provided "in" the taxpayer's household. The term "household" does not necessarily include only one's own home or property. The use of tradesmen's services provided beyond the property boundary on third-party land, such as public land, can also qualify for tax relief under Section 35a Paragraphs 3 and 4 of the Income Tax Act.
However, these must be services that are carried out in direct spatial connection with the household and serve the household (cleaning and snow removal on public sidewalks on the border of the property).
In the case of the married couple who had commissioned a new front door, the work was clearly not performed in the plaintiffs' home, but in the workshop of the tradesman's business. The court found it irrelevant that the services to be provided by the tradesman were the subject of a single contract (delivery and installation of a new front door) and that some of the work was performed on the plaintiffs' property.
Only the installation work (installation of the new front door) on-site at the plaintiffs' home constitutes a privileged craftsman's service. In the court's view, a corresponding apportionment of the work performed according to the location of the service should generally be possible without further ado. The fact that the plaintiffs were unable or unwilling to subsequently provide the apportionment despite the court's request is therefore to their detriment. An estimate is out of the question.
This is not the first case of this kind. In 2016, the Rhineland-Palatinate Finance Court rejected a tax reduction for the upholstery of upholstered furniture in a nearby craftsman's workshop because the service was not provided "in the taxpayer's household."
Source: DHPG
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