A private client in Germany may deduct 20 per cent (Sec. 35a(3) EStG) of the labour costs for tradesman services directly from their income tax, but no more than 1,200 euros (Sec. 35a(3) EStG) a year. Whether they can do so is decided by your invoice, not by their tax adviser. The relief applies expressly to labour costs only (Sec. 35a(5) EStG), and the share has to be identifiable from the details given on the invoice (BMF circular, para. 40). Anyone who shows labour, machine time, travel and material as a single sum takes a three-figure amount away from the client and takes away from themselves a selling point that costs nothing.
Key takeaways
- For tradesman services, income tax is reduced by 20 per cent of the expenditure, but by no more than 1,200 euros a year (Sec. 35a(3) EStG). The deduction applies to labour costs only (Sec. 35a(5) EStG).
- Labour costs include machine and travel costs charged on the invoice; material costs stay out of account, with the exception of consumables (BMF circular, para. 39).
- Splitting the invoice total into labour and material by percentage is permitted for the issuer of the invoice, whereas an estimate by the taxpayer is not (BMF circular, para. 40). The split is therefore your job.
- Earthworks and planting in the garden of an owner-occupied house can qualify as a tradesman service, regardless of whether the garden is newly laid out or redesigned (BFH VI R 61/10).
- An invoice and payment into the contractor's account are conditions (Sec. 35a(5) EStG); cash payments, cash deposits and part-payments in cash cannot be recognised (BMF circular, para. 50).
- For services connected with a property there is a separate duty to issue an invoice to private clients within six months (Sec. 14(2) UStG).
Why the invoice is a sales question
Between the site visit and the order, private clients regularly do a sum they rarely say out loud: what does this cost me in the end? The tax relief under Sec. 35a EStG shifts that sum noticeably, because it does not reduce the tax base but the income tax itself. For tradesman services that is 20 per cent (Sec. 35a(3) EStG) of the expenditure, capped at 1,200 euros (Sec. 35a(3) EStG) a year. For household-related services, which include routine garden maintenance, it is 20 per cent capped at 4,000 euros (Sec. 35a(2) EStG). This is not a discount you grant. It is an amount the client gets back from the tax office, provided your invoice puts them in a position to claim it.
The condition is not buried in small print, it is in the statute: the deduction from income tax applies to labour costs only (Sec. 35a(5) EStG). The tax administration's circular is more explicit and requires that the share of labour costs can in principle be determined separately from the details given on the invoice; an estimate of that share by the taxpayer is not permitted (BMF circular, para. 40). So whether a client receives several hundred euros or nothing is decided by whoever writes the invoice. A client who finds out in the spring of the following year that the tax office will not accept the item has that conversation with you, not with the authorities.
The second effect comes before the order. Showing the split in the quote lowers the price in perception without lowering the price. On a paving job with 4,080 euros of labour costs net, 4,855.20 euros gross including 19 per cent VAT, that is 971.04 euros flowing back the following year. It is the same lever that a quote with explained items pursues anyway, only with a figure that does not come from you but from the Income Tax Act. Businesses that also show price ranges on the website gain a second figure that pre-qualifies enquiries.
The relief is not a discount
What Sec. 35a EStG actually covers
The statute knows three categories of relief with three different ceilings, and they are mutually exclusive. Two of them are relevant to landscaping: household-related services and tradesman services. The difference is not a formality, because a factor of more than three lies between a 4,000-euro ceiling and a 1,200-euro one. Which category applies depends on the nature of the work, not on the legal form of your business: the contracted company does not have to be entered in the register of craft trades (BMF circular, para. 22).
The dividing line follows proximity to running a household. Garden maintenance such as mowing lawns and cutting hedges counts as a household-related service, including the disposal of green waste as an ancillary service (BMF circular, Annex 1). Garden design and paving work, by contrast, are tradesman services (BMF circular, Annex 1). The Federal Fiscal Court drew the line in 2011: earthworks and planting go beyond the usual domestic care of a garden and are therefore not a household-related service, but they can be an eligible tradesman service (BFH VI R 61/10).
- Household-related employment within the mini-job framework: 20 per cent, capped at 510 euros (Sec. 35a(1) EStG). Of no relevance to contracted businesses.
- Household-related services: 20 per cent, capped at 4,000 euros (Sec. 35a(2) EStG). This is where recurring grounds and garden maintenance lands.
- Tradesman services for renovation, maintenance and modernisation work: 20 per cent, capped at 1,200 euros (Sec. 35a(3) EStG). This is where paving, earthworks, planting and fencing on existing property lands.
In practice that means a business offering both has two pots for the same client. The maintenance contract runs against the 4,000-euro pot, the terrace refurbishment against the 1,200-euro one. Anyone who runs maintenance contracts as a service of their own should separate them visibly on the invoice, otherwise recurring items slip into the smaller pot. You make the allocation by naming the type of service, not by quoting the section number.
Der Abzug von der tariflichen Einkommensteuer nach den Absätzen 2 und 3 gilt nur für Arbeitskosten.
Labour, machines, travel, material: the dividing line
The most common mistake on landscaping invoices is the collective item. A single line reading paving work as per quote with a total amount is commercially correct and worthless for tax purposes, because no labour share can be derived from it. The second most common mistake is reading the term labour costs too narrowly. Many businesses count only hourly wages and leave out machines and travel, although both are eligible.
The circular lists the components expressly: labour costs are the expenses for using the tradesman service itself, including the machine and travel costs charged on the invoice (BMF circular, para. 39). Material costs and other goods supplied stay out of account, with the exception of consumables (BMF circular, para. 39). The plate compactor, the tipper's journey and the operating fluids therefore belong in the eligible block, the paving stones do not. Businesses that already itemise excavated soil and disposal in the quote have the positions separated and only need to carry them over.
| Item on the invoice | Counts as | Eligible under Sec. 35a |
|---|---|---|
| Crew hours worked at the household | labour costs | yes (BMF circular, para. 39) |
| Machine time charged on the invoice | labour costs | yes (BMF circular, para. 39) |
| Travel to and from the site | labour costs | yes (BMF circular, para. 39) |
| Consumables such as lubricants and cleaning agents | labour costs | yes, excepted from the material rule (BMF circular, para. 39) |
| Paving stones, substrate, plants, fence panels | material costs | no (BMF circular, para. 39) |
| Work outside the household, for example prefabrication | labour costs | no, to be marked as such on the invoice (BMF circular, para. 39) |
| Design work by an architect | separate service | no (BMF circular, Annex 1) |
| Development and road construction levies | public charge | no (BMF circular, Annex 1) |
Two routes lead to a permissible split. The clean route is the itemised list: every position has its own line, labour and material are totalled separately. The pragmatic route is the percentage split, because a percentage allocation of the invoice total into labour and material costs by the issuer of the invoice is permitted (BMF circular, para. 40). What does not work is leaving the split to the client. An estimate of the labour share by the taxpayer is not permitted (BMF circular, para. 40).
One worry less in the invoicing software
New build or existing property: where the relief ends
The hardest boundary does not run between labour and material but between existing property and new build. Trade work carried out as part of a new-build project is not eligible; new-build measures are all measures arising in connection with the creation of a household up to its completion (BMF circular, para. 21). For landscaping that is the difference between the outdoor works that belong to the shell construction and the outdoor works created three years later.
The annex to the circular lists garden design with eligible labour costs, but expressly excludes the cost of laying out the garden for the first time as part of a new-build project as well as material costs (BMF circular, Annex 1). What matters is the date the house was completed, not whether the garden had been planted before. This is precisely where the Federal Fiscal Court gave businesses room: for earthworks and planting in the garden of an owner-occupied house it is irrelevant whether the garden is newly laid out or a garden left in its natural state is redesigned (BFH VI R 61/10).
Second boundary: the place. Only labour costs for services performed in the taxpayer's household are eligible, and labour costs for services performed outside the household are to be marked accordingly on the invoice (BMF circular, para. 39). Paving work is eligible inside the household, all measures outside it are not (BMF circular, Annex 1). For a business that explains paving work as a service that means cutting stone in your own yard belongs on a line of its own. Third boundary: public funding. The relief does not apply to measures for which low-interest loans or tax-free grants are claimed (Sec. 35a(3) EStG).
Grave care is excluded
Invoice, payment, timing: the three formal conditions
Even a cleanly split invoice does not carry if the form is wrong. The statute names two conditions in a single sentence, and the circular adds the payment methods. The third condition is timing, and it sits in a place that is easy to miss when reading Sec. 35a EStG: in the general part of the Income Tax Act.
- An invoice exists. The condition is that the taxpayer has received an invoice for the expenditure (Sec. 35a(5) EStG). The client does not have to attach it to the tax return but must be able to produce it on request (BMF circular, para. 49).
- Payment goes to the account. Payment must be made into the account of the party providing the service (Sec. 35a(5) EStG). Bank transfer, standing order, direct debit and card payment are recognised, cash payments, cash deposits and part-payments in cash are not (BMF circular, para. 50).
- The year of payment decides. Expenditure is to be deducted for the calendar year in which it was made (Sec. 11(2) EStG). It is not the invoice date that counts but the outflow at the client's end.
The cash-flow principle leads to a conversation worth having. A client who has a terrace built in November and pays the final invoice in January shifts the entire relief into the following year. A client who has already used up the 1,200-euro ceiling this year with a heating repair gains from the shift. Instalment payments can only be taken into account if a corresponding split has been made for them and an invoice exists that meets the requirements (BMF circular, para. 40). An interim invoice without a labour-cost breakdown is therefore a lost payment in tax terms.
Independently of Sec. 35a EStG, a separate invoicing duty applies to work on a property: for a taxable supply of work or another service connected with a property provided to a private client, the invoice has to be issued within six months of the service being performed (Sec. 14(2) UStG). The private client has to keep the invoice, a payment record or another form of evidence for two years (Sec. 14b(1) UStG), and the invoice must contain a reference to that retention duty (Sec. 14(4) UStG). Failing to issue the invoice, or issuing it late, is an administrative offence; the fine can be up to five thousand euros (Sec. 26a(3) UStG).
Ceiling and sequence: what actually arrives in a year
The ceiling is an annual limit per household, not a limit per job. Where two single people live together in one household, they can claim the ceilings only once in total (Sec. 35a(5) EStG). For the business that means the ceiling is a shared resource, and your job competes with the chimney sweep, the boiler service and the decorator. Naming that openly in the conversation makes you look informed rather than promising a figure that has already been spent.
Work through an example instead of abstracting. A terrace refurbishment with 4,080 euros of labour net and 2,610 euros of material produces relief of 971.04 euros on the gross labour costs of 4,855.20 euros and therefore stays below the ceiling. A client who also has a maintenance contract worth 1,200 euros a year uses the other pot for it, the one with a ceiling of 4,000 euros (Sec. 35a(2) EStG), because garden maintenance is a household-related service (BMF circular, Annex 1). Experience suggests that this very pairing is the argument that turns a one-off job into a contractual relationship.
Invoice 2026-0418 Place of supply: client's household
No. Service Net Type
1 Labour, paving work, 96 h 3,480.00 EUR labour costs
2 Machine time, plate compactor, digger 420.00 EUR labour costs
3 Travel to and from site, 6 journeys 180.00 EUR labour costs
4 Paving stones, grit, sub-base 2,610.00 EUR material
Labour costs, total (items 1-3) 4,080.00 EUR
Material costs, total (item 4) 2,610.00 EUR
Net total 6,690.00 EUR
VAT at 19 % 1,271.10 EUR
Invoice total 7,961.10 EUR
Note: the labour costs include machine and travel costs.
All services were performed at the client's household.
Please pay by bank transfer only, into the account shown below.
Please retain this invoice for two years (Sec. 14b(1) sent. 5 UStG).The block below the line is the part most invoicing programs do not supply on their own. It costs a few minutes to set up once and saves every follow-up call afterwards. Three lines are enough: labour costs total, a note on machine and travel costs, a note on the place of supply. The retention sentence at the same time satisfies the reference duty under VAT law (Sec. 14(4) UStG).
What this means for quotes and the website
The tax note works differently in three places. In the quote it is a calculation, on the services page a trust signal, in the enquiry form a filter. Using it in only one place gives away the other two. The tone matters: you explain a statutory option and disclose the split, but you do not promise a refund. Recognition in the individual case is decided by the client's tax office.
Quote: the second figure
Below the quote total, state the expected gross labour share and next to it 20 per cent of that as information (Sec. 35a(3) EStG). After that the client is no longer comparing gross totals alone.
Services page: the paragraph that stays
A short section explains what labour costs are, why material does not count and that payment has to be non-cash. That is content which serves search queries all year round.
Invoice: the three lines
Labour costs total, a note on machine and travel costs, a note on the place of supply. That satisfies the requirement set out in the circular (BMF circular, para. 40).
Scheduling: the turn of the year
A field in the enquiry form asks whether the client wants to pay this year or next. The year of payment decides (Sec. 11(2) EStG).
On the website the note does not belong on a page of its own but into the existing pages. One paragraph on the paving and pathways page, one on the garden design page, one FAQ entry. For businesses rebuilding their service pages it is a module of a few hundred characters that fits on every service page. Anyone advertising with figures should follow the rules for prices and claims in advertising.
Wordings that hold up
The difference between a robust note and a vulnerable one lies in four words. Robust: we state the labour costs separately on the invoice. Vulnerable: you save 1,200 euros. The first sentence describes your service, the second promises an outcome you do not control. The following sequence has proved itself in practice because it starts with your own service and ends with the caveat.
Name the service
We state labour, machine time and travel separately from material on the invoice. That describes what you do, not what the tax office does.
Name the legal basis
For tradesman services at an owner-occupied household, 20 per cent of the labour costs are deductible from income tax, capped at 1,200 euros a year (Sec. 35a(3) EStG).
Name the condition
An invoice and payment into our account are required (Sec. 35a(5) EStG). Cash payment is not recognised for tax purposes (BMF circular, para. 50).
Name the caveat
Recognition in the individual case is decided by the tax office responsible for you. As a rule this note does not replace tax advice.
We state labour, machine time and travel separately from material on the invoice. That describes what you do, not what the tax office does.
For tradesman services at an owner-occupied household, 20 per cent of the labour costs are deductible from income tax, capped at 1,200 euros a year (Sec. 35a(3) EStG).
An invoice and payment into our account are required (Sec. 35a(5) EStG). Cash payment is not recognised for tax purposes (BMF circular, para. 50).
Recognition in the individual case is decided by the tax office responsible for you. As a rule this note does not replace tax advice.
What you can change this week
The effort is manageable and one-off. The invoice template gains two total lines and three notes, the quote one line, the services page one paragraph. After that the split runs along without anyone having to remember it. Anyone working on the contract documents anyway should check at the same time whether the notice on the right of withdrawal for consumers is current and whether variations are signed off in writing before they are carried out.
- Add the lines for labour costs total and material costs total to the invoice template and include the note on machine and travel costs (BMF circular, para. 39).
- Mark items performed outside the household, for example prefabrication in your own yard (BMF circular, para. 39).
- Give interim invoices the same split so that instalment payments count as well (BMF circular, para. 40).
- Stop accepting cash and add the note on payment into the account to the invoice (Sec. 35a(5) EStG).
- Add the retention note for private clients to the invoice footer (Sec. 14(4) UStG).
- Add a short paragraph on the tax relief to each service page and ask in the enquiry form which year the client wants to pay in. There are further ideas in the article on rainwater infiltration and in the article on charging a design fee instead of free plans.
Sources and legal basis
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