GER: BFH Rules on Second-Residence Taxes for Dual Households

Apr 26, 2024 Benn-Ibler Rechtsanwälte

The German Federal Fiscal Court (Bundesfinanzhof, hereinafter BFH) has ruled that in the case of dual households, second-residence taxes cannot be filed as deductible expenses. Rather, they form part of the costs of using a residence and are directly related to actual rental expenses.

In the case at hand, a woman had a main residence and a secondary residence in the city where she was employed.

In her income tax return, she claimed expenses of around EUR 13,000 for accommodation at her primary place of work and a second-residence tax of around EUR 900 under other expenses for dual housekeeping as income-related expenses.

However, only the statutory maximum of EUR 12,000 was accepted by the tax office for accommodation costs at the first place of work. For other expenses related to dual households, however, the tax office did not recognise the second-residence tax.

The woman took legal action against this before the competent tax court – and was initially successful. In the court’s opinion, the second-residence tax was not a deductible accommodation expense under Section 9(1) sentence 3 no. 5 of the German property tax law (Eigentumsteuergesetz, EstG). In addition to the maximum amount, such expenses are deductible as income-related expenses.

The BFH has now decided the opposite.

Taxes on second residences are not to be considered income-related expenses. For this reason they cannot be deducted. Rather, such taxes are part of accommodation costs as expenses for the use of the accommodation and thus directly related to the actual cost of renting.

BFH VI R 30/21 (13 December 2023)