Court: Spouses' care home costs deductible as extraordinary expenses
A German tax court has ruled that costs incurred by spouses for staying in a care home due to illness are deductible as extraordinary expenses. The ruling clarifies the application of the 'household savings' deduction for both individuals.
Germany's Federal Fiscal Court (Bundesfinanzhof) has clarified the tax deductibility of care home expenses for married couples. The court ruled that costs incurred by taxpayers for medically necessary accommodation in a retirement or nursing home can be claimed as extraordinary expenses under Section 33 of the Income Tax Act (EStG).
These deductible expenses include not only medical and nursing care but also the costs for accommodation and meals within the facility, as they are considered overall costs related to the illness. If a couple's shared household is dissolved due to their need for care and subsequent move to a facility, the deductible amount must be reduced by the so-called 'household savings' (Haushaltsersparnis). This saving represents the costs no longer incurred for accommodation and meals at their former private residence.
The case involved a married couple who, due to illness, had to move into a shared care home and abandon their existing household. The tax authorities argued that the household savings should be deducted for each spouse individually, a stance that was contested by the couple and led to the court case. The couple sought to deduct their total care costs after accounting for a simplified household savings deduction.
The Federal Fiscal Court upheld the tax authorities' position. It determined that when both spouses are housed in a care facility due to illness, a household savings deduction must be applied for each spouse separately. The court reasoned that both individuals are relieved of their previous fixed costs, such as rent and food, and that the care home costs include personal living expenses for each taxpayer.
This decision is significant for couples requiring long-term care, ensuring that the tax benefits associated with dissolving a shared household are appropriately applied to both individuals. The ruling clarifies a point of contention regarding the calculation of household savings when both partners require care.