Can I claim the fees for out-of-court debt settlement as a tax deduction?
May 16, 2024 | 70,00 EUR | answered by Ralf Hausdorf
Dear lawyer,
My name is Alwin Nitsche and I have a question regarding fees for extrajudicial debt restructuring. Some time ago I ran into financial difficulties and had to deal with my creditors. In consultation with an expert, I decided to opt for extrajudicial debt restructuring to improve my financial situation.
Now I am wondering if I can claim the fees for extrajudicial debt restructuring on my taxes. Since hiring an expert for debt restructuring is already associated with high costs, it would be very helpful for me if I could at least deduct a portion of the fees on my taxes. This would significantly reduce my financial burden and give me some more flexibility.
I am worried that the costs of debt restructuring could further worsen my financial situation if I have no way of claiming them on my taxes. Therefore, it is very important for me to know if and to what extent I can deduct the fees for extrajudicial debt restructuring on my taxes.
Can you please provide me with information on whether the fees for extrajudicial debt restructuring can be claimed on taxes? If this is possible, what requirements do I need to meet and how should I proceed to declare the fees in my tax return?
Thank you in advance for your help and support.
Sincerely,
Alwin Nitsche
Dear Mr. Nitsche,
Thank you for your inquiry regarding fees for out-of-court debt settlement and the possibility of claiming them as tax deductible. I understand your concerns about the financial burden associated with hiring an expert for debt settlement, and will therefore provide you with detailed information on this topic.
In principle, it is possible to deduct the costs of out-of-court debt settlement from your taxes. These expenses can be reported as extraordinary expenses in your tax return. However, it should be noted that the tax deductibility of extraordinary expenses is subject to certain conditions.
First and foremost, the costs for debt settlement must actually be extraordinary expenses. This means that the costs must be unforeseeable and unavoidable. In your case, where you have encountered financial difficulties and opted for out-of-court debt settlement, these conditions are likely to be met.
Furthermore, you must consider the costs of debt settlement necessary to secure your livelihood and improve your financial situation. It is important that you carefully keep all receipts and evidence of the costs incurred and be able to present them in your tax return.
To report the fees for out-of-court debt settlement in your tax return, you should enter them under the section "extraordinary expenses." Here, you can list all expenses that are not covered by insurance or other benefits and that affect your financial situation.
It is advisable to consult with a tax advisor or a specialist in tax law beforehand to ensure that you meet all the requirements for the tax deductibility of the fees and avoid any mistakes in reporting them in your tax return.
I hope that this information has been helpful to you. If you have any further questions or need assistance, please feel free to contact me.
Sincerely,
Ralf Hausdorf
Attorney at Law
