Calculate gift tax on real estate: How to pay nothing

Houses and apartments are often not inherited, but given away during one’s lifetime. Depending on the type of use and the market value, charges may be imposed.

The most important things at a glance

Regardless of whether it is inherited or given as a gift – anyone who receives a large fortune in Germany is liable for tax. In the case of gifts, it is the gift tax (more on this). This applies to private, unpaid donations among the living, such as real estate.

However, whether taxes are actually levied depends on the family relationship and the value of the gift. There is also a special rule regarding real estate. You can find out what it looks like in this guide.

What is the gift tax on real estate?

on property hangs the amount of the gift tax depends primarily on how the recipient uses the house or apartment. If he then lives in the property himself, there is usually no gift tax at all. The prerequisite for this is that the recipient at least ten years will be living in the property.

doesn’t he or rented or sold if he she, he must pay gift tax. How high this is depends on, among other things the value of the property. You can either have this determined by an appraiser before the donation (more on this below) or the tax office will take care of it afterwards.

How do you calculate gift tax on real estate?

To calculate the gift tax for real estate, six steps are necessary:

  • Step 1: determine the compensation
  • Step 2: determine the property value
  • Step 3: Calculate taxable profit
  • Step 4: Determine the tax level
  • Step 5: read the tax rate
  • Step 6: Calculate the gift tax amount

determine the compensation

First, you should know how much gifts you can afford without having to pay tax at all. that allowances are different depending on the degree of relationship:

  • Spouse and life partner: 500,000 euros
  • Children and grandchildren (if the parents of the grandchildren are dead): 400,000 euros
  • Grandchildren, if their parents are still alive: 200,000 euros
  • Parents and grandparents: 100,000 euros
  • Siblings, nieces and nephews, step-parents, children-in-law, friends, acquaintances: 20,000 euros

Gift tax must only be paid if the value of the property exceeds the tax-free allowance that is relevant to you.

Determine the property value

But how much is the property worth? As a starting point, the tax office determines market value, as soon as you inform him of the donation. Market value is the amount you would get if you sold the property.

If you want to find this out in advance, you need one commission experts. This can be done, for example, via your house bank.

Depending on the type of donation, the experts use different assessment procedure. According to Section 182 of the Valuation Act (BewG), there are three procedures for developed properties:

  • comparative value method
  • income approach
  • procedure for material value

To comparative value method is primarily intended for one- and two-family houses and owner-occupied apartments. The purchase prices actually paid for comparable properties are used. The calculation is based on the property’s size, year of construction, location, living space and the property’s equipment.

To income approach used for rented residential properties, commercial properties and mixed properties, for which the usual local rent can be set. The calculation is based on the standard base value.

To this is added the so-called gross profit. This is due to the expected annual rental income less administration costs, remaining useful life and property interest.

To procedure for material value on the other hand, is used when there are neither comparable values ​​nor local rents. It is based on standard land value and real building value. The latter depends on the age and design of the building.

Good to know: The three types of assessment only concern the building. The underlying property is assessed separately according to the size of its area and the standard land value. The formula for this is: property value = property area in square meters x standard land value per square meters.

Calculate taxable profit

Now you can decide whether you have to pay tax at all. To do this, subtract your personal allowance from the market value of the property.

If the bottom line is a positive amount, this is the result taxable acquisition, also called gain. You must pay gift tax. If the compensation is greater than the value of the property, you owe nothing to the state.

Determine the tax level

If you have a taxable gain, the gift tax amount will be yours tax class on. This should not be confused with the tax bracket that applies to your income.

There are three tax brackets for donations, which again depend on your degree of relationship to the donor. The following applies: The lower, the lower the gift tax.

You can read the tax bracket that applies to you from the table:

Tax class I Tax class II Tax class III
Spouse or registered partner parents and grandparents Everyone else (eg unregistered partner, friends, distant relatives)
children and stepchildren Siblings and children of siblings
grandchildren and children of stepchildren cardboard parents
Parents-in-law, parents-in-law
divorced spouse or partner in a dissolved partnership

read the tax rate

Using your tax bracket and the size of the gain, you can now see which of the following table tax rate applies to you.

Taxable gain Tax rate tax class I Tax rate tax class II Tax rate tax class III
up to 75,000 euros 7 percent 15 percent 30 percent
up to 300,000 euros 11 percent 20 percent 30 percent
up to 600,000 euros 15 percent 25 percent 30 percent
up to 6 million euros 19 percent 30 percent 30 percent
up to 13 million euros 23 percent 35 percent 50 percent
up to 26 million euros 27 percent 40 percent 50 percent
more than 26 million euros 30 percent 43 percent 50 percent

Calculate the gift tax amount

Finally you can the amount of the gift tax determine. You simply have to multiply the taxable gain by your tax rate. You now owe this amount to the tax office.

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