TAX ON HOUSE SALE: YES OR NO?
If you, as the owner, have used your house for sale exclusively for yourself, no house sale tax is payable. Owner-occupation applies from the time you bought the house or the end of construction.
The situation is different when renting out. To avoid paying speculation tax, you must have owned your home for at least 10 years. Another case for avoiding the house sale tax: You use your property yourself for at least the year of sale plus the two previous calendar years.
Overview: House sale tax yes or no
- Own use: Tax-free (normally)
- No own use: Tax-free after 10 years
- Extent of the house sale tax: depends on sales profit, according to your income tax rate
YOU SHOULD KNOW THESE TAX DEADLINES WHEN SELLING A PROPERTY
The time has come: you earn money with your property sale . The only question is how much of it belongs to you and what tax burdens will you incur? Basically, all your profits from private sales transactions are subject to tax (§ 23 EStG). This also applies to the sale of your house, flat or property.
However, there is a speculation period of 10 years. This applies to all property transactions. What exactly does this mean for your house sale? You do not have to pay tax on the property sale profit as soon as 10 years have passed between the purchase (or: construction of your property) and the final sale. Please note that the notarisation date of your purchase contract is decisive.
As soon as the speculation period has expired, you do not have to pay house sale tax. The same applies to the owner-occupation of your property.
TAXES ON PROPERTY SALES: SPECIAL RULES FOR OWNER-OCCUPATION
If you have used your property yourself all the time or only some of the time, you generally do not have to pay tax on your profit. There are 2 cases for this:
- Exclusive own use
- Use only in the year of sale plus 2 preceding calendar years (§ 23 EstG)
This case also applies to a calendar year that has already begun. We have prepared an example for you to illustrate this: A property is purchased in 2014, occupied by the owner from December 2016 and sold in January 2018. No speculation tax is then due.
But what exactly is meant by own use or own residential purpose? The law stipulates that the property must be occupied either by you or by family members. Who belongs to the family? From a tax perspective, only your children. In addition, this rule only applies for the period in which your children are still receiving child benefit. If relatives have used your home, the increase in value is normally taxed as soon as it is sold.
There is also a special rule for selling a house within your family. If you want to sell your property to your child or spouse, you do not have to pay property transfer tax.
If you sell your property , you will not be able to use it yourself, as you cannot live on an undeveloped property. Normally, no speculation tax is payable as soon as your property sale generates a profit.
THIS IS HOW HIGH THE SPECULATION TAX CAN GET
You are probably wondering exactly how much speculation tax is payable on the profit from your property. The amount of speculation tax depends on 2 factors:
- Amount of capital appreciation & capital gain
- Individual income tax rate
The depreciation that you previously claimed from the tax office reduces the acquisition costs if you have rented out your property. The amount of depreciation is 2% for old and new buildings and 2.5% for old buildings constructed before 1925. The following parameters fall under the term "acquisition costs":
- Incidental purchase costs:
- Notary and court costs
- property tax
- estate agent
Your individual tax rate depends on your total taxable income, i.e:
- Your income from your job
- Your capital investments
- etc.
Ideally, you should wait 10 years before selling your rented property (house or flat). In addition to the increase in value, the advantage here is that you do not have to pay tax on your profit. Another option is to register your own use. If you live in your property yourself in the year of the sale plus the two previous calendar years, your profit will be tax-free.
Talk to us about your planned house sale. We will advise you in detail on the house sale tax in your individual case.
WHAT YOU NEED TO BEAR IN MIND WITH REGARD TO PROPERTY SALES TAX
There are special features that you should bear in mind when selling your property. There is no owner-occupation here. Why not? Quite simply: ultimately, you cannot live on an undeveloped property. This is why speculation tax applies even before the deadline if you sell your property for a profit.
HOW INHERITANCES AFFECT YOUR HOUSE SALE TAX
What happens to the house sale tax if you inherit? In this case, you take over the speculation period of the person from whom you inherit.
For example: If the person who bequeathed you their property had already owned their rented house for 10 years, you do not have to pay speculation tax. The same applies if the testator
- has used the house themselves since purchasing it or
- used the property themselves in the year of inheritance plus the two preceding calendar years
If inheritance tax is payable, it must be paid separately.
HOW LOSSES FROM THE SALE OF YOUR PROPERTY ARE TREATED FOR TAX PURPOSES
If you incur losses on the sale of your home, you must observe the equalisation provisions of Section 23 of the Income Tax Act. According to this, your losses can only be offset up to the "amount of the profit that the taxpayer realised from private sales transactions in the same calendar year". In plain language, this means that you may not offset the loss from your private sales transaction against other income.
WHY SELLING A HOUSE IS WORTHWHILE DESPITE TAX
If you plan your house sale carefully and pay attention to a few important parameters, your house sale will pay off - even if you pay a house sale tax. With the right estate agent at your side, you can play it safe. Your estate agent will include all the decisive factors in their professional property valuation. These include
- Your personal situation
- current market situation
- Development of regional prices on the property market
Feel free to contact us for your individual property valuation. We will find out for you how high the house sales tax, land sales tax or flat sales tax will be if you have not used your property yourself or would like to sell before the speculation period expires.
CONCLUSION ON HOUSE SALE TAX
When you sell your house, you do not always have to pay a house sale tax. If you consider owner occupation and all deadlines, you will not only sell your house at a profit but also save tax.
Note: The information contained on this website is for general information purposes only and does not relate to the specific circumstances of any individual or legal entity. It does not constitute business, legal or tax advice. This content may not be a substitute for personal advice from a competent person.