No tax bonus for work in the workshop

New ruling on the tax bonus for craft services: The Neustadt Finance Court denied a couple the tax bonus because the work was carried out in the craftsman's workshop.

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

A couple had commissioned an interior decorator to reupholster their sofa and two armchairs. The interior decorator picked up the sofa set and upholstered the furniture in his nearby workshop.

For the costs incurred, approximately €2.600, the plaintiffs applied for a tax reduction in their tax return under Section 35a Paragraph 3 of the Income Tax Act (EStG) (use of tradesmen's services). The tax office rejected this claim. Reason: The law requires that the tradesmen's services be provided "in the taxpayer's household." The Federal Fiscal Court interpreted the term "household" in a spatial and functional sense. The appeal was unsuccessful.

The Neustadt Finance Court has dismissed the lawsuit

According to the Neustadt Tax Court (case no. 1 K 1252/16), a craftsman's service is only provided "in" a household if it is performed within the spatial and functional area of ​​the household. According to this court, the household does not end at the property boundary, so the costs of installing a service connection on public land or costs for winter maintenance are also eligible for tax relief.

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However, the craftsman's services must be performed in direct spatial proximity to the household. Given a distance to the workshop of – in this case – four kilometers, this is not the case. The interior decorator's transport service does not change this, as it was only a minor, ancillary service.

Another decision of the Munich Finance Court

The Munich Finance Court had ruled differently in an earlier case – at the time, it involved carpentry work. It concerned a door that had been manufactured in the carpenter's business, where the majority of the labor costs were also incurred. The tax office refused to recognize precisely these costs. The Munich Finance Court ruled, however: Labor costs incurred in the carpenter's business, i.e., outside the household, are also deductible. (Ref.: 7 K 1242/13).

Sources: Press release of the Neustadt Finance Court dated 02.08.2016 / DHB