(2022)
What conditions must be met for the deduction of care home costs?
Expenses for accommodation in a care home, nursing home, or the care section of a retirement home or residential facility can be deducted as extraordinary expenses under Section 33 of the Income Tax Act if the reason is a need for care, a disability, or an illness.
Persons in need of care are those "who, due to a physical, mental, or emotional illness or disability, require assistance with the ordinary and regularly recurring activities of daily life on a permanent basis, expected to last at least six months, to a significant or higher degree" (Section 14 SGB XI).
Persons are considered in need of care if they:
- have been classified into one of the three care levels (until 2016) or one of the five care grades (from 2017) according to the Care Insurance Act, Sections 14, 15 SGB XI.
- have been found to have a significant impairment of everyday competence, such as dementia patients (Section 45a SGB XI).
- possess a severely disabled pass with the mark "H" or "Bl".
- receive outpatient care and the care costs are invoiced separately by a recognised care service.
- are accommodated in a retirement home and care services of care rate level 0 are invoiced separately (BFH judgment of 10.5.2007, BStBl. 2007 II p. 764).
Expenses for home accommodation due to care needs, disability, or illness can be deducted as extraordinary expenses like medical costs under Section 33 of the Income Tax Act. This applies not only to the costs of medical services and care but also to accommodation and meals. The tax office reduces the costs by a reasonable burden.
If care home costs are deducted as extraordinary expenses, the increased disability allowance of 7.400 Euro and the 'normal' disability allowance cannot be claimed (R 33.3 para. 4 EStR). Furthermore, care home costs are reduced by a so-called household saving due to saved meal and housing costs if the household is dissolved.
The situation is different for age-related accommodation in a retirement home: In this case, care home costs are considered normal living expenses and are not recognised for tax purposes. If a need for care arises at a later date and at least care level I is determined, the care home and care costs can be fully deducted as extraordinary expenses, with the tax office applying a reasonable burden (BMF letter of 20.1.2003, BStBl. 2003 I p. 89).
