Tax expert Fabian Walter explains how various household expenses can be tax-deductible, including costs for cleaning services and tradesman work. Home office deductions are available, either through a flat rate or actual costs, while real estate investments allow for depreciation of building costs. Additionally, furniture for home offices can be deducted, with specific limits on amounts. Home renovations may also qualify for deductions, especially energy-efficient upgrades, offering potential savings on taxes.
Tax-Deductible Household Services: What You Need to Know
Tax expert Fabian Walter highlights that various expenses incurred in private homes can be tax-deductible. Understanding which household services and tradesman expenses can be claimed on your tax return can significantly reduce your overall tax burden.
Eligible Household Services and Tradesman Expenses
If you hire help for household chores, you can claim those costs on your tax return. This includes a range of services such as cleaning. For example, when you utilize household-related services like a cleaning company, you can deduct 20 percent of the expenses from your income tax, up to a maximum of 4,000 euros. This limit is reached when your total expenses for these services amount to 20,000 euros, leading to a potential tax saving of 4,000 euros.
For instance, if a self-employed cleaner charges a total of 2,000 euros for the year, the client can deduct 20 percent, resulting in a tax saving of 400 euros annually.
Similarly, for tradesman services related to renovations, maintenance, and modernization, you can also deduct 20 percent of the costs, capped at 1,200 euros each year. Remember, all payments should be made through bank transfers rather than cash. Documentation such as utility bills or homeowners’ association statements can serve as proof of payment.
Home Office Deductions: Understanding Your Options
If you don’t have a dedicated home office but use part of a room for work, you can take advantage of the home office flat rate of 6 euros per day for a maximum of 210 days. You must choose between deducting actual home office costs or using the flat rate—both cannot be claimed simultaneously. If you do have a separate home office that is your primary workspace, you can deduct associated expenses. For the 2023 tax year, deductions can be made flat-rate up to 1,260 euros or based on actual costs, limited to the proportion of your home that the office occupies.
For example, if your home office is 25 square meters and your apartment is 100 square meters, you can deduct expenses based on that proportion, which would be 25 percent of eligible costs.
Tax Benefits of Real Estate Investments
If you purchase or construct a rental property, you can depreciate the building’s acquisition or construction costs over a set period, providing a significant tax advantage. Acquisition costs encompass the purchase price, notary fees, property transfer tax, and brokerage fees. Construction costs include expenses for architects, tradesmen, and materials. However, remember that the land itself cannot be depreciated.
For instance, if you buy a property for 600,000 euros, with 200,000 euros allocated to the land and 400,000 euros to the building, you can depreciate the 400,000 euros. Typically, for properties rented out for private use, the depreciation rate is 2 percent per year for buildings completed after December 31, 1924, and before January 1, 2023. Newly constructed rental properties may qualify for a 3 percent depreciation rate.
Home Office Furniture and Renovation Costs
Purchasing furniture and equipment for a home office or rented property can also offer tax benefits. However, furnishings for personal living spaces are not deductible. Equipment used in the home office, like desks or office chairs, can be deducted, but note that if the purchase price exceeds 800 euros net, it must be depreciated over 13 years.
To deduct the full purchase price in the same tax year, make sure the item costs less than 952 euros. There are discussions to raise this limit to 1,000 euros net starting January 1, 2024, pending approval.
For homeowners who don’t rent out their properties, material costs for renovations are generally non-deductible, except for energy-efficient upgrades. For example, installing a heat pump in your residence may allow for deductions of up to 20 percent of the costs over three years, with a maximum tax saving of 40,000 euros. This applies only if the property is over ten years old at the time of installation and the work is performed by a qualified contractor.
In summary, understanding these tax benefits can help you optimize your deductions and potentially save a substantial amount on your taxes.