Does your home look like a disaster zone? Small consolation from the BFH: where the work does not constitute routine measures or the remediation of construction defects, there are options for deducting renovation expenses on owner-occupied residential buildings from tax. Several more recent BFH decisions allow renovation costs to be deducted under certain conditions, provided that they are not ordinary repair and modernization measures or costs for remedying construction defects. Renovation work on a building affected by true dry rot — BFH judgment of 29 March 2012, VI R 70/10: Expenses for remediating a building affected by true dry rot may, in individual cases, constitute an unavoidable event where the infestation has gone undetected, there is a concrete risk that the building will become uninhabitable, and extensive renovation is required as a result. Consequently, such expenses must be recognized as extraordinary expenses within the income tax return. Renovation work involving asbestos products — BFH judgment of 29 March 2012, VI R 47/10: A concrete, foreseeable health hazard is required; it is not sufficient that asbestos fibers as such are classified as hazardous. Where the health hazards are attributable to a third party and the taxpayer fails to pursue enforceable civil-law claims for remediation, the expenses for removing the concrete health hazards are not deductible as extraordinary expenses.
Frequently asked questions
Frequently asked questions
Can renovation costs for an owner-occupied home be deducted as extraordinary expenses?
Yes, under strict conditions. The BFH recognises renovation expenses as extraordinary expenses, provided they do not constitute routine repair and modernisation measures or the remedying of construction defects. As a rule, an unavoidable event or a concrete risk to health or to the habitability of the building must be present.
Are expenses for eliminating true dry rot tax-deductible?
Yes, the BFH (judgment of 29.03.2012, Az. VI R 70/10) ruled that remediating a building affected by true dry rot can constitute an unavoidable event. The prerequisite is that the infestation initially went undetected and that there is a concrete risk of the building becoming uninhabitable. The expenses can then be recognized as an extraordinary burden (außergewöhnliche Belastung).
When are asbestos remediation costs deductible as extraordinary expenses?
According to the BFH ruling of 29 March 2012 (VI R 47/10), a specific, demonstrable health hazard is required; the general danger posed by asbestos fibres alone is not sufficient. If the hazard originates from a third party, the taxpayer must first enforce their civil law claims for remedy; otherwise, the deduction is denied.
Which renovation costs are not deductible as extraordinary expenses?
Standard repair and modernization measures as well as the remediation of construction defects are generally not deductible. Also excluded are expenses where the taxpayer fails to pursue existing and enforceable civil law claims against a responsible third party.
What are the general requirements for deducting building renovation costs?
There must be an unavoidable event, such as a concrete health hazard or the imminent uninhabitability of the building. The expense must have arisen unavoidably, and the taxpayer must not leave any claims for compensation against third parties unused. The reasonable personal contribution under § 33 EStG is offset against the recognized expenses.