(2023)
When can damage to your home be deducted?
Expenses for damage repair to an owner-occupied home can under certain conditions be deducted as extraordinary expenses in accordance with § 33 EStG, with the tax office applying a reasonable burden.
- Tax consideration is only possible for damage caused by an "unavoidable event", e.g. flooding, storm, hail, earthquake, lightning strike. Expenses for the rectification of construction defects are not recognised.
- The damage must affect an "existentially important area", particularly the home. Damage to cars or garages is not considered.
- There is no standard insurance option for the risk of damage. If the risk could have been covered by insurance, the tax deduction is excluded.
Fortunately, the tax authorities have decided that so-called elemental insurance does not constitute a generally accessible and standard insurance option (BMF letter dated 6.9.2005, BStBl. 2005 I p. 860). This means that damage caused by flooding, hail or storms can be deducted even if you do not have corresponding building insurance.
The Hamburg Fiscal Court recently ruled that expenses related to damage caused by martens to a home are not deductible. This applies at least if the marten damage does not occur acutely and in a concentrated manner, but is tolerated over a certain period or if initially ineffective means are used to scare the marten away (judgment of 21.2.2020, 3 K 28/19). An appeal against the judgment is pending before the Federal Fiscal Court, so in similar cases an objection should be lodged and reference made to the proceedings (Ref. VI B 41/20). However, the BFH has allowed an appeal in another case concerning beaver damage (Ref. VI R 42/18). To maintain or increase the chances of success, homeowners should not only prove that material damage has occurred but also use expert reports to demonstrate that health risks existed (as also recommended by Matthias Tiemann, presiding judge at the FG, EFG 2020, pp. 837/840).
The Rhineland-Palatinate Fiscal Court recently ruled that costs incurred due to legal disputes related to the construction of a home are not tax-deductible as extraordinary expenses (judgment of 7.5.2020, 3 K 2036/19).
Also, see the article "Unwetterschäden 2021 steuerlich absetzbar".
