Natural disasters: tax relief for victims
Repeatedly, heavy rainfall and the associated flooding have caused considerable damage. Many people are left with nothing, having lost their belongings and seeing only the remnants of their existence. The damage repair will lead to significant financial burdens.
Almost always, the finance ministries of the affected federal states decide in these cases to assist those affected through tax measures to avoid undue hardship. The so-called disaster decree is then regularly enacted, granting tax relief and reductions.
In particular, those affected can deduct expenses for the replacement of furniture, household items, and clothing, as well as for damage repair to their own home as extraordinary expenses in accordance with § 33 EStG.
Since the tax deduction for household items, clothing, and building damage in natural disasters is provided for in the disaster decree and this decree represents an equity regulation according to § 163 AO, the usual insurance option requirement should be disregarded here as an exception. The Federal Ministry of Finance already stated in 2013 that "so-called elementary insurance does not constitute a generally accessible and usual insurance option within the meaning of R 33.2 No. 7 EStR" (BMF letter dated 21.6.2013, No. VI). Therefore, tax offices are instructed not to refuse the recognition of damage costs due to flooding and inundations because of a lack of elementary insurance.
Here are some important tax tips:
- For your expenses for the replacement of furniture, household items, and clothing, as well as for damage repair to your own home, the tax office calculates a reasonable burden, which depends on your income, the number of children, and your marital status. It amounts to between 1 and 7 percent of the total income. If this reasonable burden is exceeded, every additional euro reduces taxes. Therefore, it is particularly worthwhile now to meticulously collect all receipts for medical expenses, doctor and pharmacy costs, etc.!
- For damage repair to your home, you can claim the direct deduction for craftsman services according to § 35a EStG for the part of the expenses not considered as extraordinary expenses due to the reasonable burden. This means: Costs up to 6.000 Euro are directly deducted from the tax liability at 20%, a maximum of 1.200 Euro. However, only labour costs and any invoiced machine and travel costs plus the applicable VAT are considered here. ATTENTION: It is assumed in your favour that this partial amount primarily relates to wages (BMF letter dated 9.11.2016, BStBl. 2016 I p. 1213, para. 32). Be sure to get an invoice and pay it only by bank transfer!
- Always claim your expenses in the year they were incurred in the tax return. Even if you took out a loan to pay. The ongoing interest for the loan - but not the repayment instalments - can also be deducted as extraordinary expenses in subsequent years.
- If you finance the damage costs with funds you received as a gift, you can still deduct your expenses as extraordinary expenses and do not need to offset the gifted funds against them (BFH judgment of 22.10.1971, BStBl. 1972 II p. 177).
- Without waiting for the tax return, employees can have the expenses deductible as extraordinary expenses entered early at the tax office as an allowance for the monthly wage tax deduction. The entry is made in your electronic wage tax deduction features. This reduces the wage tax every month and increases the net income accordingly. Use the form Application for wage tax reduction 2022/2023.
