A divorce is a very difficult time for the spouses. They have to deal with many emotions, extraordinary stress, but also high costs. Attorney fees, court costs, legal advice – all of this you have to pay out of your own pocket. It is therefore not surprising that German taxpayers who want to get divorced try to reclaim at least part of the amount in their annual tax return. In today’s article, you will learn whether this is still possible.
Are divorce costs tax-deductible?
Until the last day of the year 2012, divorce costs, which were part of the costs of a civil lawsuit, could be recognized in the annual tax return as so-called extraordinary burdens. Legally, the situation changed on January 1, 2013. A change was introduced to § 33 paragraph 2 of the German Income Tax Act, stating that legal costs can only be deducted from taxes if they are expenses – we quote – “without which the taxpayer would risk losing their livelihood and being unable to meet their basic needs in the usual manner.” Consequently, the costs of a divorce are currently not tax-deductible.
While in a divorce the costs are unfortunately no longer deductible, it’s different at the beginning of a marriage: Even if the costs of the wedding celebration itself are not directly tax-deductible there are ways to reclaim part of the expenses through household-related services under certain conditions.
Tax deduction of divorce costs – different interpretations by the courts
Since the courts have interpreted the change described above differently over the past few years, the Federal Fiscal Court (BFH) issued a ruling (dated May 18, 2017, Az. VI R 9/16) on the tax deductibility of divorce costs. In it, you can read the confirmation from the BFH that divorce costs are indeed necessary, but there is no threat to existence in the case of divorce. Therefore, they cannot be considered as extraordinary burdens.
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Equalization of accrued gains when deducting divorce costs from taxes (divorce costs)
The equalization of accrued gains, also known as gains compensation, is part of marriage law in Germany and concerns an increase in assets of one of the spouses that occurred during the marriage. In the context of a divorce procedure, the gain is to be equalized unless otherwise agreed in the marriage contract. Pension entitlements, which are totaled and divided equally between the two divorcing spouses, are also equalized. These entitlements include, for example
- civil servant pensions,
- occupational pension schemes,
- statutory pension insurance,
- Riester pension.
Maintenance with tax-deductible divorce costs
According to the so-called actual division, the former spouse whose income is higher pays maintenance to the former partner. The payer has the option to claim this as:
- as a special allowance, with the consent of the maintenance recipient,
- as extraordinary burdens, without the consent of the maintenance recipient.
What was previously deductible in terms of divorce costs?
As already mentioned, the costs of a divorce have not been tax-deductible since 2013. Previously, however, this was possible, and these costs included among others:
- attorney or court costs,
- court costs,
- costs for experts and appraisers,
- travel costs (to attorneys, court, notary).
However, the divorce costs concerning the division and separation of assets were not deductible. These included:
- maintenance proceedings and adjustment of income and pensions,
- custody arrangements for children,
- changes in the land register,
- costs for expert opinions and legal counsel.
Deduction of divorce costs before the Federal Fiscal Court’s decision
How is it with divorce cases conducted before the end of 2012? If your tax return has not yet been completed, you have the possibility to deduct your divorce costs. You must be patient and wait to see how the tax office reacts to your case. Even while waiting, you can calculate your tax refund for the tax year without considering the divorce costs. A tax software will help you with the calculation. One such application is Taxando, which allows you to handle all your tax formalities without leaving your home.
Maciej Szewczyk
He gained experience as a consultant on IT projects for many international companies. In 2017, he founded the startup taxando GmbH, where he developed the innovative tax app Taxando, which simplifies the filing of annual tax returns.
Maciej Szewczyk combines technological expertise with in-depth knowledge of tax regulations, making him an expert in his field. In his private life, he is a happy husband and father and lives with his family in Berlin.
