Tax tip: Tax reductions for service charge settlement

For tenants, it can be useful to study the landlord's service charge statement more closely. Certain costs listed there can be taken into account for tax purposes in the tenant's income tax return. This was confirmed by the Federal Fiscal Court in a recent ruling (VI R 24/20) of 20 April 2023, also for disputed cases.

The ruling was based on the following facts: The landlord had passed on costs, among others, for cleaning the staircase and checking the smoke alarms to the tenant as part of the service charge statement. When preparing his income tax return, the tenant applied for a tax reduction under section 35a of the Income Tax Act. According to this, income tax is reduced by 20 percent of the expenses for so-called "household-related services" or craftsmen's services up to certain maximum limits. The prerequisite is that the taxpayer has received an invoice and the payments have not been made in cash but by bank transfer.

In the case before the Federal Fiscal Court (Bundesfinanzhof), both the tax office and the fiscal court rejected a tax reduction, stating that there was no contractual legal relationship with the tenant but with the property management company and that the tenant did not have an invoice from the service providers. However, the Federal Fiscal Court did not follow this opinion in favour of the taxpayer in the above-mentioned ruling. It ruled that tenants can also claim the tax reduction if they did not conclude the contracts with the service providers themselves. Also, an ancillary housing costs statement containing the essential details of an invoice as well as a non-cash payment replaces the craftsmen's invoice required for the tax reduction.

Therefore, tenants should carefully check the individual items of the ancillary costs statement with regard to expenses for craftsmen's and household-related services in order to be able to claim the tax reduction.