German Court Rules In Favor of Tax Deduction Limits for Property Maintenance Funds

The Federal Fiscal Court has upheld that landlords cannot claim tax deductions for maintenance reserve contributions until the funds are actually spent.

• The Federal Fiscal Court (BFH) ruled that landlords cannot deduct contributions to maintenance reserves as expenses until the money is used for actual repairs or upkeep.
• The case involved a landlord couple from Franconia who sought to deduct €1,326 paid into a maintenance reserve fund as advertising expenses on their tax return.
• The court maintained that contributions to maintenance reserves do not constitute immediate expenses but are instead akin to savings, which do not qualify for tax deductions.
• This decision has widespread implications for millions of property owners in Germany, particularly those in housing associations managing shared maintenance funds.
• The ruling aligns with existing legal precedents and confirms that tax deductions are only permissible when funds are spent directly on property maintenance.

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