Household-related services and tradespeople: 20% discount

Tax Credit vs. Deduction: What's the Difference?

Under Section 35a of the Income Tax Act (EStG), no amount is deducted from income. Instead, the income tax calculated according to the tax schedule—after subtracting other tax credits—is reduced by 20 percent of the eligible expenses. A reduction of €500 therefore lowers the tax by €500, regardless of the individual’s tax rate.

There are caps on these amounts. Each of the three categories has its own maximum reduction amount, and the three maximum amounts apply simultaneously. Those who take full advantage of all three categories can receive an annual reduction of up to 510 € + 4,000 € + 1,200 € = 5,710 €.

What counts as a household-related service?

Household-related services are activities that would otherwise be performed by members of the household themselves. The tax authorities cite the following examples: preparing meals, cleaning windows, washing and ironing laundry, yard work such as mowing the lawn and trimming hedges, and assistance with moving provided by private individuals.

Caring for and tending to a pet also counts, as long as it takes place in your household—for example, grooming, walking the pet, and cleaning up after it. A pet boarding facility does not count because the service is provided outside your household.

Services provided beyond the property line may be eligible for benefits if they are performed in close geographical proximity to the household and serve its needs. For this reason, street cleaning and winter maintenance on the sidewalk—but not on the roadway—are included.

A home emergency call system is only eligible for tax deduction in the context of assisted living in a senior living facility. In the case of an au pair, 50% of the total expenses may be claimed as household-related services if the scope of the individual services is not documented.

Nursing and care services are also included (Section 35a(2), second sentence, of the Income Tax Act (EStG)). A care level or a determination of the need for care is not required. It is sufficient that services for basic care—that is, personal hygiene, nutrition, and mobility—or for assistance are utilized. The tax deduction is also available to family members who pay for the care if it takes place in their own household or in the household of the person receiving care. It applies per household: If two people are receiving care in a single household, the deduction is granted only once. In the case of residential care or long-term care, only the portions of services that are similar to household care and exceed the pure cost of accommodation are counted.

Long-term care insurance benefits that are earmarked for nursing care and personal assistance are deducted, such as in-kind nursing care benefits and reimbursement for the costs of additional personal assistance services. The long-term care allowance is not deducted because it is not earmarked for professional long-term care services. If the person receiving care claims a disability lump-sum allowance, they are not eligible for the tax deduction for these long-term care expenses. Hairdressing and cosmetic services are not considered household-related services, even if they are provided in the home; they count as long-term care services only if they are listed in the long-term care insurance benefits catalog.

The service must be provided in a household located in the European Union or the European Economic Area.

What counts as a trade service?

Tradespeople's services include renovation, maintenance, and modernization work in the home. According to the tax authority’s guidelines, this includes work on walls, roofs, and facades; repairs to doors, windows, and flooring; work on heating and plumbing systems; the modernization of bathrooms and kitchens; the repair of household appliances; landscaping; and additions and extensions.

Maintenance and inspection work also counts, even if nothing is broken—for example, maintenance of heating systems, elevators, or fire extinguishers; leak tests on sewage systems; or sampling of drinking water. This also applies if the tradesperson issues a certificate for official purposes, and even if a repair does not follow immediately or is performed by another company. Therefore, chimney sweep services are fully eligible—including sweeping, as well as measurement and inspection work, such as the inspection of fireplaces. However, activities related to property valuation, the issuance of an energy performance certificate, and activities related to financing are not eligible.

The contracted company does not have to be registered in the trade registry. Small business owners and government entities may also provide eligible trade services.

Eligible expenses include labor costs, including machinery and travel expenses, and the corresponding VAT.

New construction projects are not eligible for the tax break. This includes all work related to the construction of a home until its completion. However, if you create new living or usable space in an existing home—for example, by converting an attic or basement, or by adding an extension—that is eligible for the tax break. It does not matter for tax purposes whether the expenses are classified as maintenance or construction costs, and even an increase in the property’s utility value does not preclude the tax deduction.

Measures for which public funding in the form of a low-interest loan or a tax-exempt grant has been received are not eligible. This exclusion applies to each individual measure, but in its entirety: it also applies to the portion of the expenses that does not affect the subsidy, for example, because it exceeds the maximum subsidy amount. It is not possible to split the expenses in order to receive the tax credit for only a portion of them. If only one of several measures is subsidized, the others remain eligible: In the case of a subsidized heating system and non-subsidized thermal insulation, the tax credit applies to the insulation.

What are the rules for mini-jobs in the household?

For minor employment in a private household, income tax is reduced by 20 percent upon application, up to a maximum of €510 (Section 35a(1) of the Income Tax Act (EStG)). According to the tax authority’s information sheet, the reduction applies to wages, the employer’s social security contributions, the flat-rate tax, the U1 and U2 levies, and accident insurance contributions. The annual certificate from the Minijob-Zentrale serves as proof.

Labor costs only, cashless payments only: What are the requirements for documentation?

For household-related services and tradespeople’s services, the law requires an invoice and payment to the service provider’s bank account (Section 35a(5) of the Income Tax Act (EStG)). Cash payments do not count. Labor costs must be itemized separately on the invoice. In the case of flat rates for maintenance or cleaning, labor costs may be included as a calculated portion of the total, but this portion must be specified in an attachment to the invoice. The VAT applicable to labor costs does not need to be shown separately. Installment payments are only valid if the amount has been appropriately allocated and an invoice is provided.

According to the guidelines, the supporting documents do not have to be submitted with the tax return. The tax office may request them.

Can tenants take advantage of the discount?

Yes. Tenants can claim their share of utility costs. The utility bill serves as sufficient proof. For homeowners’ associations, an annual statement from the property manager is sufficient for allocating costs. Homeowners also benefit when the association or property manager is the client.

What doesn't work?

Excluded are expenses that have already been taken into account as business expenses, income-related expenses, special expenses, or extraordinary expenses. This also applies to child care expenses under Section 10(1)(5) of the Income Tax Act (EStG). If two single individuals live in the same household, they may claim the maximum amounts only once in total. Multiple households—such as a primary residence and a vacation home—also trigger the maximum amount only once.