What can be tax deductible from the funeral benefit according to the Civil Service Retirement Benefits Act?
September 17, 2013 | 30,00 EUR | answered by Anton Pernitschka
After the death of my civil servant father-in-law, a death benefit of 4544€ was paid out in accordance with §18 para. 1 of the Civil Servants Act. Based on a splitting table, I determined that our tax burden increased by 1294€ as a result. As a result, only 3250€ remained to cover all expenses, and the burden increased to over 5%. The funeral costs alone amounted to over 4228€. In addition, there were costs related to the completely asset-less inheritance as well as co-payments for medical expenses. I was the authorized representative and handled everything. The tax office states that there is no burden, as everything is covered by the received cash benefits (death benefit). However, after the tax deduction, this is unfortunately no longer the case. Is this in accordance with the law? Can costs not be offset against this? Where is this stated?
Kind regards,
Dear questioner,
In the context of an initial consultation and considering the regulations of this forum, I would like to answer your question regarding the funeral benefit under the Civil Service Pension Act, which is classified as tax-privileged pension benefits (Income Tax Guidelines R 19.8 Para. 1 No.1).
The funeral benefit is not part of the estate, but is paid out according to a statutorily defined order. The recipient must pay tax on the funeral benefit as other income (Income Tax Guidelines R 19.9 Para. 3 No. 3).
If there are no relatives, the funeral benefit is paid to "other persons." In this case, the funeral benefit remains tax-free as "emergency assistance" (§ 3 No. 11 Income Tax Act).
Expenses for a funeral can be claimed by the surviving relatives as extraordinary burdens if the burial costs cannot be covered by the estate and the funeral benefit is not sufficient. The Lower Saxony Finance Court has ruled on the deductible nature of estate liabilities in the judgment of February 23, 2011 - 3 K 332/10. According to this ruling, only liabilities existing as of the relevant date, the deceased's death, can be considered. The heir assumes the estate in the condition it was in at the time of the deceased's death, excluding consideration of future burdens on the heir. The Federal Fiscal Court (BFH) also emphasized the importance of the valuation date principle in its judgment of February 17, 2010, BStBl II 2010, 641, clarifying that the income tax payable on revenues cannot be deducted as an estate liability.
A revision has been filed against the judgment of the Lower Saxony Finance Court (BFH- II R 15/11). In this case, it is advisable to wait for a final court decision and request a suspension of proceedings from the tax office.
Best regards,
Anton Pernitschka
Tax advisor
