Important for homeowners: Repair first, then save taxes

It's the same every time: the maintenance fee not only deducts the costs of running and managing an apartment from the owner's account, but also the so-called maintenance reserve. This is required by law for residential property associations (WEG) - multi-family houses whose apartments belong to different owners - and is usually around one euro per month and square meter of living space. Depending on the size, this quickly adds up to a higher three-digit, maybe even four-digit amount per apartment per year. Money that many landlords would like to claim directly from the tax office.

But that is only possible if the money from the reserve has actually been spent, i.e. if it has been used to pay for repairs or modernizations. This is what the Federal Finance Court (BFH) in Munich has now decided (case number IX R 19/24) . However, the fact that the owner has paid the money into the reserve is not enough to deduct the amount as business expenses. The reform of the Home Ownership Act in 2020 does not change this.

Those looking for a family-friendly home often want 100 square meters or more. But large properties are expensive and therefore risky. It may be wiser to buy smaller - and perhaps more often.

The lawsuit was brought by a married couple from Bavaria who rented out several condominiums and wanted to deduct the payments into the reserves from their taxes in the same year - regardless of whether work was actually paid for with them. Their argument: the money is ultimately gone for them. After that, they no longer have access to it or a pro rata claim, also because the WEG has been a fully legal entity since the 2020 legal reform.

The judges confirmed this, but it doesn't change anything. The money from the reserve must actually be used to pay for work on the house, "only then does the expenditure actually benefit the property," explained BFH judge Jens Reddig at the annual press conference of the highest German tax court. But that is the prerequisite for deducting advertising costs from rental income. Before that, the reserve is only "a kind of savings book for the WEG." The ruling confirms assessments by the tax office and the Nuremberg tax court.

The Federal Fiscal Court also announced that it would decide on a total of four lawsuits relating to the new property tax this year. Judgments on both the so-called federal model and the regulation in Baden-Württemberg are expected to be made in late summer or autumn, it said. The core issue is whether the valuation of millions of properties and buildings in recent years was carried out in accordance with the constitution and whether property owners should be given more and, above all, more favorable opportunities to challenge the values ​​determined by the tax authorities.

The Federal Fiscal Court made its first decision on this last summer , with the result that the legal regulations were not sufficient and a blanket assessment without any possibility of exceptions was not legal. If the judges now again raise concerns about the new property tax - which is now in force - this could, in extreme cases, require the next reform. The most recent revaluation of the approximately 36 million properties in the country had also forced a ruling. In 2018, the Federal Constitutional Court ruled that the calculation based on decades-old standard values ​​was unfair. The result was a huge tax reform project that led to years of dispute between the federal and state governments and now between tax offices and citizens.