Damage to your home: When is it tax deductible?
Expenses for damage repair to an owner-occupied home can be claimed for tax purposes as exceptional costs under section 33 of the Income Tax Act, subject to certain conditions. A reasonable personal contribution is deducted.
Conditions for deduction:
- Unavoidable event: The damage must have been caused by an unforeseeable and unavoidable event such as flooding, storms, hail, earthquakes, or lightning strikes. Building defects or self-inflicted damage are not recognised.
- Essential area: The damage must affect the home or other essential areas. Damage to cars or garages is not considered.
- No insurance option: If the risk of damage could be covered by insurance, a tax deduction is excluded. However, elemental insurance is not considered a generally accessible insurance (BMF letter dated 6.9.2005, BStBl. 2005 I p. 860). This means that damage caused by flooding, storms, or hail can be deducted even if no corresponding insurance is in place.
Important rulings:
- Damage caused by martens: The Hamburg Tax Court ruled that expenses for repairing damage caused by martens are not deductible if the damage was not acute but tolerated over a longer period (judgment of 21.2.2020, 3 K 28/19). An appeal against the non-admission of the appeal is pending at the Federal Fiscal Court (Ref. VI B 41/20).
- Pollution: The Baden-Württemberg Tax Court ruled that renovation due to high pollution levels in the home can be deducted as an exceptional cost if the measures are necessary and verifiable (judgment of 1.2.2024, 1 K 1855/21). In the specific case, the deduction was denied because the claimant not only carried out necessary renovations but also demolished and rebuilt the house. In addition, the evidence (reports, medical certificates) was deemed insufficient.
- Legal disputes: Costs related to legal disputes during the construction of a home are not exceptional costs and therefore not tax-deductible (Rhineland-Palatinate Tax Court, judgment of 7.5.2020, 3 K 2036/19).
Practical tips:
- Prior reports: Before starting renovation work, homeowners should ensure they can provide sufficient evidence (medical certificates, technical reports) to prove the necessity and inevitability of the measures.
- Independent evidence procedure: In case of uncertainty, it may be advisable to initiate an independent evidence procedure in accordance with section 155 FGO in conjunction with sections 485 ff. ZPO to secure the evidence for the tax office.
- Insurance cases: Always check whether the risk of damage is covered by insurance. If so, a tax deduction is excluded.
Further information on tax deduction options for storm damage can be found in the article: Unwetterschäden 2021 steuerlich absetzbar.
