Tradesperson costs: § 35a EStG or deductible expenses?
German income tax law offers two entirely different routes for one and the same tradesperson's invoice — and picking the wrong one usually costs a four-figure sum. § 35a Abs. 3 EStG takes 20% of the labour cost straight off the tax bill, capped at €1,200 a year. Deductible income-related expenses (Werbungskosten) under § 9 EStG instead reduce taxable income, but with the full invoice including materials. Which route applies is not the owner's choice; it follows from how the property is used. And the dividing line sits in a single clause.
What § 35a EStG actually gives you
The provision has three separate pots that sit side by side, each with its own cap. For property owners, subsection 3 matters most, because it covers every renovation, repair and modernisation measure — from a dripping tap to a new bathroom.
| Pot | What falls into it | Credit against tax due | Annual cap |
|---|---|---|---|
| § 35a Abs. 1 | Household-related mini-job employment | 20% | €510 |
| § 35a Abs. 2 | Household-related services, care and support services | 20% | €4,000 |
| § 35a Abs. 3 | Tradesperson services for renovation, repair, modernisation | 20% | €1,200 |
The €1,200 cap is reached once eligible labour costs in a single year exceed €6,000. Anything above that is simply lost, so it is worth splitting larger projects that run across a year-end in the invoicing as well. And because the credit is deducted from the income tax actually assessed, it comes to nothing where no tax is due: a pensioner with no tax liability gets no refund.
The clause that decides everything
§ 35a Abs. 5 Satz 1 EStG expressly puts the credit last in the queue: it may only be claimed “soweit die Aufwendungen nicht Betriebsausgaben oder Werbungskosten darstellen und soweit sie nicht als Sonderausgaben oder außergewöhnliche Belastungen berücksichtigt worden sind” — only to the extent the expenditure is not a business expense or a deductible income-related expense, and has not been taken into account as a special expense or an extraordinary burden. For a let flat, tradesperson costs are deductible expenses against rental income, so § 35a EStG is blocked. Not as an option to weigh up, but as a matter of law.
That is not bad news. Under § 9 Abs. 1 Satz 1 EStG, deductible expenses are “Aufwendungen zur Erwerbung, Sicherung und Erhaltung der Einnahmen” — expenditure to acquire, secure and maintain income — and that covers the entire invoice, materials included. Compare a bathroom refit of €8,000 gross, of which €4,500 is labour and €3,500 materials:
| Owner-occupied (§ 35a Abs. 3) | Let (§ 9 EStG) | |
|---|---|---|
| Amount that counts | €4,500 labour | €8,000 whole invoice |
| Effect | 20% credit against tax due | Deduction from taxable income |
| Saving at a 42% marginal rate | €900 | €3,360 |
The gap widens with the marginal rate and with the share of materials. Only on a very low income and a pure labour invoice do the two routes land in the same region — and even then it is the use of the property that decides, not the invoice.
Labour only, never materials
§ 35a Abs. 5 Satz 2 EStG limits the deduction under subsections 2 and 3 expressly to labour costs. If the invoice does not break them out, the credit is lost entirely — the tax office will not estimate a labour share. So for any owner-occupied property, ask for labour, travel and machine costs to be shown separately, and do so before you pay. Getting it afterwards is reliably harder.
Two formal conditions that trip people up. Under § 35a Abs. 5 Satz 3 EStG you need an invoice and a payment into the provider's bank account. Paying cash against a receipt rules the credit out, however sound everything else is. And under § 35a Abs. 3 Satz 2 EStG there is nothing for publicly funded measures for which interest-subsidised loans or tax-free grants are claimed — a KfW grant and § 35a EStG are mutually exclusive for the same measure.
The mixed-use house
In a two-family house with one flat owner-occupied and one let, both routes run side by side: the word “soweit” (“to the extent”) in § 35a Abs. 5 Satz 1 EStG splits the invoice, not the building. Say a roofer repairs for €10,000 gross, €6,000 of it labour, and 60 of the 200 m² living space are let — 30%:
- Let share: 30% of €10,000 = €3,000 of deductible expenses, materials included.
- Owner-occupied share: 70% of the labour cost = €4,200, of which 20% = €840 in tax credit.
The statute does not say which key to apportion by; in practice the floor-area share is used where the work cannot be assigned directly to one flat. A repair that concerns only the let unit is fully deductible — nothing to apportion there.
Two neighbouring provisions deserve a look before you rely on the expense deduction. If the work falls into the first three years after purchase, the 15% threshold for acquisition-related production costs under § 6 Abs. 1 Nr. 1a EStG can push it into depreciation instead of an immediate deduction. And larger repair expenditure can be spread over two to five years, which smooths the progression effect.
Energy-efficiency work runs under its own provision. For insulation, windows or a heating replacement on an owner-occupied house there is the far more generous credit under § 35c EStG — 20% of the expenditure including materials, up to €40,000 per property. You cannot have both: § 35c Abs. 3 Satz 2 EStG denies the credit where “eine Steuerermäßigung nach § 35a in Anspruch genommen wird”, that is, where the § 35a credit is claimed for the same energy-efficiency measure. Run both calculations before you file.
What landlords owe their tenants
One point landlords rarely think about: their tenants have the same claim under § 35a EStG — for those service-charge items that contain tradesperson and service elements. Stairwell cleaning, garden maintenance, winter service, heating and smoke-alarm servicing, the chimney sweep: all items that reach the tenant through the service-charge statement and can be eligible there. The condition is that the statement makes the labour share visible. In 2023 the Federal Fiscal Court clarified that the tenant needs no contract of their own — but does need a document showing the essential invoice details and the non-cash payment.
What the courts have decided
The wording of § 35a EStG does not say where the “household” ends, what a valid payment looks like, or who may claim the credit at all. Three decisions of the Federal Fiscal Court (Bundesfinanzhof, BFH) answer exactly those three questions.
BFH, judgment of 20 April 2023 – VI R 24/20
The Sixth Senate held that “Mieter können die Steuerermäßigung gemäß § 35a EStG für haushaltsnahe Dienstleistungen und Handwerkerleistungen auch dann geltend machen, wenn sie die Verträge mit den Leistungserbringern nicht selbst abgeschlossen haben” — tenants may claim the § 35a credit even where they did not conclude the contracts with the providers themselves. As evidence, a service-charge or service-fee statement, or a certificate following the template in Annex 2 of the Ministry of Finance circular of 9 November 2016, will normally suffice, provided it contains the essential invoice details and the non-cash payment required by § 35a Abs. 5 Satz 3 EStG. The decision is published in the Federal Tax Gazette II, so the tax authorities apply it generally. For landlords the practical consequence is a cheap piece of service with real value: show the labour shares separately in the service-charge statement. It costs nothing and spares you the queries every spring.
BFH, judgment of 28 April 2020 – VI R 50/17
This case concerned an owner-occupied home on what had been an unmade sand track, for whose surfacing the municipality levied a development contribution. The holding: “Die Erschließung einer öffentlichen Straße steht nicht im räumlich-funktionalen Zusammenhang zum Haushalt des Steuerpflichtigen, der auf Grund öffentlich-rechtlicher Verpflichtung zum Erschließungsbeitrag herangezogen wird” — developing a public road has no spatial and functional connection to the household of the taxpayer who is charged the contribution under public law. § 35a Abs. 4 Satz 1 EStG requires the service to be performed “in einem […] Haushalt des Steuerpflichtigen”, in a household of the taxpayer, and in practice that ends at the property boundary. Work on your own plot, garden included, is eligible; a contribution towards the municipality's work in front of it is not. This decision, too, is officially published.
BFH, order of 9 June 2022 – VI R 23/20
A master roofer had work done on his own home by a GmbH in which he held a stake, and settled the invoice through his shareholder current account. That is not enough: the credit applies only “wenn der Rechnungsbetrag auf einem Konto des Leistenden bei einem Kreditinstitut gutgeschrieben wird” — where the invoice amount is credited to an account of the provider at a credit institution; a credit by way of set-off does not meet the statutory requirements for the payment process. The point is documentation through the banking system. The practical consequence: offsetting against your own services, set-off and cash payments are not a valid route, however sensible they may look in the individual case — transfer the money, even for small amounts. The decision is officially published.
Frequently asked questions
Does the invoice count in the year of the work or the year of payment?
The year of payment. § 35a Abs. 5 Satz 3 EStG ties the credit to payment into the provider's account, so paying a December invoice in January shifts the credit into the following year. Where labour costs exceed €6,000, that can be exactly the right move: two years, two caps.
We live together as an unmarried couple — does each of us get €1,200?
No. Under § 35a Abs. 5 Satz 4 EStG, two single people living together in one household may claim each of the caps only once in total. The same household-based logic applies to married couples.
Does § 35a EStG apply to a holiday home?
Only if it forms part of your household, that is, if you use it yourself. § 35a Abs. 4 Satz 1 EStG requires a household of the taxpayer in the European Union or the European Economic Area, so an owner-occupied second home in Austria counts, whereas a permanently let holiday flat falls under the expense deduction instead.
What about work not carried out at the property?
A joiner making a door in his own workshop is working outside your household. What matters is the spatial and functional connection, which the BFH located at the property boundary in the development-contribution case above. Ask for the invoice to separate travel, on-site fitting and the workshop element.
And if the property is let part-way through the year?
Then the moment of the expenditure decides, not the year as a whole. Allocation follows the use at the time of payment; cleanly separated records are worth more here than any after-the-fact estimate.
Labour costs kept separate, property by property
RenoDiary brings invoices, labour shares and measures together per property — so that come spring it is clear which item belongs in Anlage V and which in the § 35a box.
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- § 35a EStG (tax credit for household-related employment, household-related services and tradesperson services) — Gesetze im Internet (retrieved on 6 September 2026)
- § 9 EStG (deductible income-related expenses) — Gesetze im Internet (retrieved on 6 September 2026)
- § 6 Abs. 1 Nr. 1a EStG (acquisition-related production costs) — Gesetze im Internet (retrieved on 6 September 2026)
- § 35c EStG (tax credit for energy-efficiency measures, relationship to § 35a EStG) — Gesetze im Internet (retrieved on 6 September 2026)
- BFH, judgment of 20 April 2023 – VI R 24/20 (credit for tenants, evidence by statement or certificate) — full text at the Bundesfinanzhof (retrieved on 6 September 2026)
- BFH, judgment of 28 April 2020 – VI R 50/17 (development of a public road not eligible) — full text at the Bundesfinanzhof (retrieved on 6 September 2026)
- BFH, order of 9 June 2022 – VI R 23/20 (credit to an account at a credit institution) — full text at the Bundesfinanzhof (retrieved on 6 September 2026)
This article offers general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether a specific measure is eligible, and how a mixed-use property is to be apportioned, depends on the individual case; the figures in the tables and examples are worked illustrations.