The Federal Fiscal Court has ruled that, pursuant to Section 10f of the Income Tax Act (EStG), the tax deduction for maintenance expenses on a residence used for personal living purposes that is a historic building is not transferable to heirs. If the taxpayer who incurred the expenses dies before the end of the ten-year deduction period, the remaining deductible amounts cannot be carried forward by the heirs. The decision is consistent with earlier Federal Fiscal Court case law, according to which tax claims and benefits that are closely tied to the taxpayer’s person generally do not pass to heirs.
Practical example:
The plaintiff’s parents each owned a 50% share of a parcel of land with a building on it, which is a historic landmark. They extensively renovated the building. The historic preservation authority confirmed in several certificates that the work performed between 2009 and 2015, at a total cost of €1,421,041.70, was necessary to preserve the building as a historic monument or to ensure its appropriate use. According to the findings of the tax court, the plaintiff’s parents, as well as the plaintiff himself, have been using the building for their own residential purposes since 2016. The parents claimed deductions under Section 10f of the German Income Tax Act (EStG).
The Federal Fiscal Court (BFH) ruled that the right to deduct expenses under Section 10f of the Income Tax Act (EStG) is a tax benefit tied to the individual. The fundamental principle that income tax is a personal tax plays a decisive role here: Taxpayers are considered individually, and their tax liability ends upon their death. The transfer of tax benefits between individuals is possible only in a few exceptional cases expressly provided for by law, such as in the case of income-related assets. However, there is no special provision for non-income-related tax benefits, such as those governed by Section 10f of the German Income Tax Act (EStG).
The only exception expressly provided for in the law applies to spouses who are assessed jointly. In such cases, the surviving spouse may continue to claim certain tax deductions. However, this special provision does not apply to children or other heirs, as in the present case.
Conclusion: Section 10f of the Income Tax Act (EStG) must be applied strictly on an individual basis. It cannot be extended to heirs outside of marriage, and therefore the heir’s lawsuit was dismissed as unfounded.