Tax Return: No Partial Deduction for Private Building Expenses

Recent Ruling on Taxes and Solar Power Systems

Your tax advisor in Düsseldorf and Oberhausen informs you: The costs of a private building that generates no income cannot be claimed on your tax return, even if a solar system is installed and operated on the roof. The Federal Fiscal Court (BFH) reached this ruling in March 2014. In doing so, the court clarified that a photovoltaic system and the associated property constitute two separate economic assets and must be treated separately for income tax purposes.

A Brief Overview of the Case

In the present case, the plaintiff had installed a solar system on each of two warehouses. Since he fed the generated electricity into the public grid, he reported these payments as business income on his income tax return. In addition, he leased the two warehouses to his wife, who operated a horse boarding facility there. The competent tax office reviewed this and did not recognize the leasing of the warehouses, as there was no apparent intention to generate a profit. Furthermore, the tax authority did not accept the halls, which were claimed as business expenses for operating the photovoltaic system, as deductible.

Tax advisors agree with the ruling

Tax advisors and experts such as Trimborn. Tackenberg. Partner view this ruling as a logical consequence. A photovoltaic system is considered an independent asset and must therefore be treated separately for income tax purposes. Even if the roof of a property is needed to mount a solar system, this does not allow for the depreciation of partial costs as business income. The Federal Fiscal Court has now confirmed this legal treatment in its ruling of October 17, 2013 (Case No. III R 27/12).

No Significant Disadvantage Arises for Income Tax Purposes

For taxpayers who operate a photovoltaic system on their private residence, the Federal Fiscal Court’s decision is by no means negative. It is certainly true that the costs of the house are not depreciated proportionately via the solar system. However, in return, the house is also not part of the business assets. Therefore, no income tax would be due upon the sale of the house.

We are your tax advisors in Düsseldorf and Oberhausen

Do you have specific questions about this ruling, or would you like comprehensive tax advice on another topic? We are happy to assist you!

Sources: Federal Fiscal Court (BFH), Press Release No. 22/2014