SteuerGo FAQs

When can legal expenses be deducted?

Legal expenses are generally only tax-deductible as exceptional costs under § 33 EStG in exceptional cases. The tax office usually accepts legal expenses only if the legal dispute concerns an existentially important area or the core area of human life.

Previous case law

1. BFH ruling of 2011: In May 2011, the Federal Fiscal Court (BFH) ruled that civil litigation costs are considered unavoidable regardless of the subject matter of the case if the legal action or defence has a reasonable chance of success and does not appear frivolous. It was sufficient for success to be at least as likely as failure (BFH ruling of 12.05.2011, BStBl. 2011 II p. 1015).
2. Change from 2015: In June 2015, the BFH returned to a more restrictive interpretation. According to this, legal expenses are only unavoidable if the event underlying the legal action is also unavoidable. Civil litigation costs are therefore generally not deductible as exceptional costs (BFH ruling of 18.06.2015, VI R 17/14).

Legal regulation since 2013

Since 2013, civil litigation costs are only deductible if the taxpayer risks losing their means of subsistence and can no longer meet their basic needs (§ 33 para. 2 sentence 4 EStG). These are very strict conditions. It is not enough for the legal dispute to concern an important area of life; the loss of material means of subsistence must be imminent.

Distinction: Material vs. immaterial means of subsistence

The Federal Fiscal Court has ruled that means of subsistence refers only to material means. Immaterial values such as emotional or social needs are not included (BFH ruling of 18.05.2017, VI R 9/16). Therefore, legal expenses concerning the core area of human life, such as disputes over child access rights, are no longer deductible (BFH rulings of 13.08.2020, VI R 15/18 and VI R 27/18).

Examples of non-deductible legal expenses:

• Father's access rights: Legal expenses for arranging access rights for a child living abroad are not deductible as they do not pose a material existential threat (BFH ruling of 13.08.2020, VI R 15/18).
• Maintenance disputes: Legal expenses to obtain higher child maintenance are not deductible if there is no existential threat (BFH ruling of 13.08.2020, VI R 27/18).
• Medical liability cases: Expenses for compensation claims due to medical errors are not deductible as exceptional costs if they are not intended to secure material existence (BFH ruling of 13.08.2020, VI R 27/18).
• Child's criminal defence: Legal expenses for the criminal defence of an adolescent child are also not deductible (BFH decision of 11.08.2022, VI R 29/20).

Exceptions

However, some courts have recognised legal expenses as exceptional costs in exceptional cases:

• Reversal of a forestry business: The Lower Saxony Finance Court ruled that legal expenses of 17.740 Euro are deductible as exceptional costs if the reversal of a gratuitous transfer of a forestry business is threatened, which would lead to an existential threat (FG Niedersachsen of 15.05.2024, 9 K 28/23; appeal VI R 22/24).

Practical tip

• Material existential threat: Legal expenses are only deductible if the taxpayer can prove that their material existence is threatened. Immaterial values such as child welfare or emotional stress are not considered for tax purposes.
• Preliminary check: In disputes, those affected should always check whether the legal dispute has existential material implications before claiming legal expenses as exceptional costs.