n principle, craftsmen’s services on properties used for one’s own residential purposes are only taken into account for tax purposes to a very limited extent.
However, if one observes important prerequisites, plans the measures accordingly and provides the necessary evidence, renovation costs can certainly be deducted from tax. In addition, there are interesting alternatives to tax incentives.
10 practical questions on the energy-efficient renovation of your own home – our experts on all aspects of real estate will give you the answers.
Energy-efficient renovation – 10 tips on tax relief and financing
Tax aspects of energy-efficient refurbishment
1. Which measures are eligible?
Specific measures carried out by a specialist company, such as thermal insulation, window replacement or the renewal of the heating system, are eligible for tax relief.
2. Who can claim the tax reduction?
Natural persons with unlimited income tax liability are eligible. In principle, the applicant must be the owner. Persons entitled to heritable building rights can also claim the relief.
3. On which properties can the measures be carried out?
The tax reduction is granted for energy efficiency measures on a building located in the EU or the EEA and used for own residential purposes. Furthermore, the beneficiary property must be older than 10 years at the start of the measure.
4. What amount of tax reduction can be applied for?
A tax reduction can be claimed in the income tax return in the year of completion of the measures and in the following year at 7% (maximum € 14,000 each) of the expenses and in the year after next at 6% (maximum € 12,000) of the expenses. Within the limits of the maximum amounts, the costs of an energy consultant can be claimed at the rate of 50% of the expenses in the year of the completion of the measure.
5. When can the costs not be claimed as a tax reduction?
If the expenses have already been taken into account elsewhere in the income tax return, or if interest-reduced loans or tax-free subsidies from publicly funded measures have been granted, no further deduction can be made.
6. What evidence must be provided?
Proof of proper implementation must be provided in the form of a certificate issued by the specialist company or another authorised person in addition to the invoice and the non-cash payment.
Financing alternatives for renovation measures
7. Are there alternatives to tax incentives?
Funding programmes of the KfW or BAFA can be used as an alternative to tax incentives. KfW loans have favourable conditions and repayment subsidies of up to 50 % (depending on the measure). Important to know: You cannot apply for KfW loans directly; the application must always go through a bank. It is not possible to combine tax incentives for the same energy-efficient refurbishment measure with other federal funding programmes. 8.
8. Are measures that do not contribute to energy efficiency improvements also financed?
Not every renovation and modernisation measure contributes to an energy improvement. For example, the renovation of bathrooms or floors. As a property owner, you have the option of carrying out the renovation measures via a building loan (secured by land registry rights) at very favourable conditions. Many banks also offer renovation loans without land charge security. The conditions for this are somewhat higher than for a construction loan, but the renovation loan is characterised by extremely uncomplicated processing. 9.
9. Are there also subsidy options if the renovation is paid for out of equity?
If no loan is required, investment grants can be applied for through the BAFA. Grants are also available for technical planning and construction supervision. These can be applied for directly through the KfW.
10. Where can I get advice?
Advice from accompanying craftsmen is recommended. These often work hand in hand with energy consultants. Furthermore, banks and tax advisors usually have the appropriate expertise and network.
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