Tax reduction for craftsmen’s services: In principle still no deduction for advance payments

For income tax purposes, 20% of expenses for handyman services, i.e. all renovation, maintenance and modernization measures carried out in your own household, up to a maximum of € 1,200 per year, can be claimed as a tax reduction. Only the labor, machine and travel costs, but not the materials, are taken into account for the tax reduction. There must also be an invoice for the services and payment must be made by bank transfer.

In its ruling dated July 18, 2024 (case reference 14 K 1966/23 E), the Düsseldorf Tax Court has now decided that, in principle, no deduction is possible for advance payments. The dispute concerned the renewal of the heating system and the delivery and installation of the sanitary system. The tradesman services were carried out in January 2023. In November 2022, the taxpayer made advance payments to the tradesman, which were to relate to the wage expenses incurred. The advance payments were not based on any partial invoices from the tradesperson, but were calculated by the taxpayer himself and announced to the tradesperson by email. These advance payments were offset in the final invoice in 2023. The taxpayer applied for tax relief for these advance payments in 2022.

The tax court has now confirmed the view of the tax office that no tax reduction is (yet) to be granted in this respect. Firstly, there was no invoice from the tradesman for the advance payments made. In addition, the expenses in dispute could not be taken into account because no expenses were incurred “for the use of tradesman services”. Craftsman services were not provided in the year in dispute. The tax reduction therefore regularly requires that the services on which the expenses are based have actually been provided.

Important to know:

The tax court states that constellations are conceivable in which advance or down payments prior to the provision of services can be recognized in the assessment period of the payment. However, this requires that such payment terms are customary in the market and/or (otherwise) objectively justified, or at least that they were requested by the craft business. An advance payment without any request from the service provider, i.e. ultimately “in the blue”, is not to be regarded as customary in the market or otherwise objectively justified and can therefore not be taken into account.

Are you unsure whether you can deduct your handyman costs from your taxes? Then get clarity and get your first aid advice now !