Share of labor costs (tax)

The labor cost portion refers, in the context of tax deductions for tradespeople’s services, to the portion of the total bill attributable to labor (wages)-as opposed to the material cost portion, which does not qualify for tax benefits. Under Section 35a of the German Income Tax Act (EStG), owners and tenants of owner-occupied properties may deduct 20% of the labor costs for tradespeople’s services directly from their income tax-up to a maximum of €1,200 per year (corresponding to eligible labor costs of €6,000). This requires a proper invoice and payment by bank transfer (no cash payments).

What counts as a qualifying trade service?

The law defines qualifying trade services as all renovation, maintenance, and modernization work in owner-occupied homes: painting, roof repairs, plumbing work, heating maintenance, flooring installation, landscaping, and much more. However, new construction projects, publicly subsidized measures (e.g., KfW subsidies), and material costs-which must be listed separately on the invoice-are not eligible.

The contractor’s invoice must clearly specify the labor portion-either on the invoice itself or via a separate statement from the contractor. If the invoice shows only a total amount, the tax official may deny the tax reduction or rely on estimated values. Therefore, explicitly ask every contractor to list labor and material costs separately.

Interaction with Household-Related Services

Section 35a of the German Income Tax Act (EStG) recognizes two subsidy categories: household-related services (e.g., cleaning staff, garden maintenance, domestic help) and tradespeople’s services. For household-related services, a separate maximum tax reduction of €4,000 applies (20% of €20,000 in labor costs). Both categories can be combined but have separate upper limits.

In the tax return, both are reported in the “Household-Related Expenses” schedule. Double tax relief for the same services is not permitted. Those who employ both tradespeople and household-related service providers can therefore achieve up to €5,200 in annual tax relief-provided that sufficient labor costs were incurred.

Important Documentation Requirements

The tax office may request proof of the claimed expenses. Therefore, keep the following documents systematically on hand: the original invoice from the tradesperson showing the wage portion, the transfer receipt (bank statement) showing the payment to the tradesperson’s business, and, if applicable, a certificate from the invoicing party regarding the wage cost portion. Those who pay in cash lose the tax reduction-this is clearly regulated and there are no exceptions.

For owners in condominium complexes, the following applies: Tradesman services billed under the WEG (e.g., stairwell cleaning, janitorial services) can also be claimed on a pro-rata basis via the annual maintenance fee statement. The property manager must issue a certificate in accordance with Section 35a of the German Income Tax Act (EStG) showing the portion of labor costs attributable to your unit.

Practical Tip for Owners in Nuremberg and Franconia

Nuremberg-based tradespeople-from heating companies to painters-are familiar with the wage cost statement under Section 35a of the German Income Tax Act (EStG). When finalizing a contract, ask them to list the wage portion separately on the invoice. Always pay by bank transfer, not in cash-otherwise, you will not qualify for the tax deduction.

Tip: If you hire multiple tradespeople throughout the year, keep all invoices and bank statements carefully as receipts. The total amount of deductible labor costs is capped at €6,000; anything above that does not result in any additional tax benefit. If you realize shortly before the end of the year that you have not yet reached the limit, you can still commission planned work in the current year and thus take full advantage of the tax reduction.

Frequently Asked Questions

Can I also claim the costs for a caretaker as a tax deduction?

Yes - janitorial services are considered household-related services and are eligible for tax relief under Section 35a of the German Income Tax Act (EStG), provided they are performed in your own household. For owners who use their property themselves, this is deductible; Section 35a EStG does not apply to landlords (landlords are subject to income-related expenses under Section 9 EStG).

Does the tax reduction also apply to tenants?

Yes. Section 35a of the German Income Tax Act (EStG) applies equally to tenants and owner-occupiers. Tenants can deduct tradespeople’s services that they have commissioned themselves (e.g., painting work paid for on their own). Operating costs billed through the utility statement are deductible with a certificate from the landlord.

Does the tradesperson have to be based in Germany?

No, it is sufficient if the service is performed within Germany. However, the issuer of the invoice must be based in the EU/EEA and issue a verifiable invoice. In practice, tradespeople operating in Germany are the norm.

What happens if I forget to have the labor portion listed on the invoice?

In that case, the tax office may deny the tax deduction. In some cases, a retroactive certificate from the contractor is possible. Contact your contractor promptly and request a corrected invoice or a separate written certificate stating the labor portion-this is usually issued without issue.

What options are available if the €6,000 limit has been reached?

Anyone who has already exhausted the maximum deduction of 6,000 euros in labor costs-corresponding to a 1,200-euro tax reduction-can still specifically check whether parts of the expenses can be claimed as income-related expenses (for rented properties, Section 9 of the German Income Tax Act) or as special expenses. Section 35a of the German Income Tax Act (EStG) generally does not apply to landlords-here, maintenance costs are directly deductible as income-related expenses without any cap on labor costs. Those who own both owner-occupied and rental properties should clearly allocate the tradespeople’s services to the respective properties and invoice them separately. In addition, the full tax credit can be claimed again in the following year-deliberately postponing major work until the following year may make tax sense if the cap has already been reached in the current year.

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