According to a recent BFH ruling of 4 April 2019 (VI R 18/17), expenses for furnishings and household items are not subject to the cap under § 9 Abs. 1 Satz 3 Nr. 5 Satz 4 EStG.
Rather, they constitute other additional expenses arising from maintaining a second household, which are clearly deductible as income-related expenses.
Background:
For a dual household, the actual expenses incurred for the use of accommodation within Germany may be claimed as accommodation costs, but only up to a maximum of EUR 1,000 per month.
In the case in dispute, the claimant had established a work-related dual household. He claimed the rent and ancillary costs as well as the acquisition costs for the furnishings as income-related expenses.
The tax office, however, only recognised the expenses up to EUR 1,000 per month.
The taxpayer brought proceedings against this and—favourably—prevailed at every instance.
The BFH judges further explained:
In the Senate's view, all expenses borne by the taxpayer for the use of the accommodation (insofar as they are individually attributable) form part of the deductible expenses within the meaning of § 9 Abs. 1 Satz 3 Nr. 5 Satz 4 EStG and may be deducted only up to the cap of EUR 1,000 per month.
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The operating costs (both heating and non-heating-related), including electricity costs, also fall within these accommodation costs (see already Senate decision of 12 July 2017 – VI R 42/15).
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Where the taxpayer has rented an apartment, these expenses initially include the gross cold rent; in the case of a condominium, the depreciation (AfA) on the acquisition or production costs as well as interest on borrowed capital, to the extent attributable to the period of use.
Expenses for household items and furnishings, including depreciation (AfA), are not to be included in the EUR 1,000 cap.
- The taxpayer incurs these expenses for the acquisition of specific assets, or, as in the case of depreciation, they serve to allocate the acquisition costs over the useful life of the respective assets.
- This is not altered by the fact that the taxpayer uses the assets within the accommodation. The use of furnishings and household items cannot be equated with the use of the accommodation as such.
- Such expenses are therefore deductible without any cap, provided they are necessary.
Note from Rechtsanwalt (German Attorney-at-Law), Steuerberater (German Certified Tax Advisor) Prof. Dr. Hans-Joachim Kanzler, co-editor of NWB and presiding judge at the BFH (ret.), Bad Kreuznach:
The ruling, favourable for the claimant, contradicts the previous view of the BMF, which had treated expenses for furnishing the apartment or accommodation as well as for household goods as accommodation costs subject to the limited deduction (BMF, circular of 24 October 2014, BStBl I 2014, 1412 marginal no. 104).
In doing so, it also resolved the question discussed in the literature regarding the interpretation of the statutory requirement "expenses for the use of the accommodation" in the sense that already underlay the BFH judgment of 13 November 2012 – VI R 50/11 (BStBl II 2013, 286, marginal no. 9, with further references). Even before the deduction limitation of § 9 Abs. 1 Satz 3 Nr. 5 Satz 4 EStG entered into force, the BFH's VI. Senate had classified the acquisition costs for the necessary furnishings not as accommodation costs, but as other necessary additional expenses.
Whether the legislator could have taken this passage of the judgment of 13 November 2012 into account at all is doubtful, since the Act amending and simplifying corporate taxation and tax travel expenses law and the judgment of 13 November 2012 were published at approximately the same time.
The BMF circular of 24 October 2014, however, took the view—without further reasoning—that the differing judgment of 13 November 2012 had been superseded. This statement, of course, related to expenses for a separately rented parking space.
Source: BFH, judgment of 4 April 2019 – VI R 18/17, NWB database reference: NWB WAAAH-16592
Frequently asked questions
Frequently asked questions
Do costs for furnishings under a dual household arrangement fall under the EUR 1,000 cap?
No. According to the BFH ruling of 04.04.2019 (VI R 18/17), expenses for furnishings and household items, including depreciation, do not count as accommodation costs within the meaning of § 9 Abs. 1 Satz 3 Nr. 5 Satz 4 EStG. They are deductible in full as other additional expenses of a dual household (doppelte Haushaltsführung) and qualify as work-related expenses, provided they are necessary.
Which costs are capped at 1,000 euros per month under the dual household rule?
The cap applies to all expenses directly related to the use of the accommodation itself. For a rented apartment, this includes the gross cold rent as well as warm and cold operating costs, including electricity. For an owned apartment, depreciation (AfA) on acquisition or production costs and interest on borrowed funds are subject to the cap, to the extent they relate to the period of use.
How does the BFH justify treating furnishings and accommodation separately?
The BFH distinguishes between the use of the accommodation itself and the use of furnishings. Expenses for household items and furniture serve to acquire independent economic assets or – via depreciation (AfA) – to allocate these acquisition costs over time. The fact that these items are used in the secondary residence does not change their independent tax classification.
What impact does the BFH ruling have on the previous administrative interpretation?
The ruling contradicts the previous position of the tax authorities in the BMF letter dated 24 October 2014 (BStBl I 2014, 1412 marginal no. 104), under which furnishing and household costs were attributed to the only limitedly deductible accommodation costs. Taxpayers can now rely on the more favourable BFH case law and claim furnishing costs in addition to the EUR 1,000 cap.
Are operating costs and electricity costs also included in the EUR 1,000 cap?
Yes. According to BFH case law (confirmed by ruling of 12 July 2017 – VI R 42/15), both warm and cold operating costs, including electricity costs, qualify as accommodation expenses and are therefore subject to the monthly cap of EUR 1,000.