Newly constructed garden faces tax miscalculation by local tax office
In a recent decision, the Federal Finance Court (BFH) has granted a tax allowance for earth and planting work, as well as the construction of a retaining wall, under section 35a para. 2 sentence 2 EStG. However, the court has made it clear that this allowance does not extend to household services.
The case in question involves the owners of a self-occupied house, who completed their property in 2003. In 2005, they undertook extensive earth and planting work in the garden of their house. Since 2006, section 35a Abs. 2 Satz 2 EStG has provided tax privileges for the use of craftsman services for renovation, maintenance, and modernization measures. The Act for the Tax Promotion of Growth and Employment (FoerderWachstG) of April 26, 2006, expanded the scope of application of section 35a EStG.
The plaintiffs applied for a tax allowance for the costs of the earth and planting work and the retaining wall under sections 35a para. 2 sentence 1 and 2 EStG. However, their application was initially rejected by both the tax office and the finance court.
According to the BFH, a "household-related service" must have a sufficient connection to household management or be related to it. The earth and planting works in question do not have a sufficient connection to household management and go beyond usual household-related care of the garden. A retaining wall at the border to the neighboring property was necessary due to the earth and planting work, but this work is fundamentally craft activities and not household-related tasks that are privileged as household-related services.
Simple craft tasks, such as regular maintenance and repair measures, which were previously considered household-related services under section 35a Abs. 2 Satz 1 EStG, are now covered by the new sentence 2 in the version of the FoerderWachstG. Activities usually performed by members of the private household or similarly employed individuals and occurring at regular intervals are considered "household-related".
The BFH overturned the judgments of the tax office and the tax court, finding them incorrect. The court decided in favor of the garden owners, granting a tax allowance for the earth and planting work and the retaining wall under section 35a para. 2 sentence 2 EStG, but not for household services.
It is important to note that the identities of the plaintiffs and claimants in this case are not disclosed due to tax secrecy and confidentiality rules applicable in such fiscal court proceedings.
In conclusion, the BFH's decision clarifies that while earth and planting work and the construction of a retaining wall can be eligible for a tax allowance under certain circumstances, household services are not included in this provision. Homeowners are encouraged to consult with tax professionals to understand the specific tax implications of their gardening and home improvement projects.
