Gift tax Real estate

Owners who wish to give away their property,

Owners who wish to give away their property should pay attention to the gift tax. It is in fact payable in the case of donations of various kinds, provided that the allowances are exceeded. However, there are ways to reduce the gift tax on real estate. In our article, we give you tips that you can use to reduce the tax burden on the transfer of an object. We will also explain how exactly the gift tax works.

What exactly is the gift tax real estate and how does it work?

Section 516 of the German Civil Code defines free donations among the living as a gift. This means transfers for which the recipients do not have to provide consideration. In addition, the Inheritance and Gift Tax Act regulates that corresponding transfers are taxed. Donations can be made by contract or by hand (simple transfer without contract). In the case of gift tax real estate, the transfer is usually determined in a contract. The gift tax is ultimately a tax that depends on the value of a gift.

What are the allowances for real estate gift tax?

It is not possible to say on a flat-rate basis how much the allowances for the gift tax are real estate. They depend on how closely the owner of the property and the recipient are related to each other. The following allowances can be distinguished:

– in the case of gifts made between spouses and civil partners, the allowance is EUR 500,000.00
– for gifts to children or stepchildren, the allowance amounts to EUR 400,000.00
– Grandchildren can benefit from an allowance of EUR 200,000.00
– all other heirs, which include uncles, aunts, siblings, nephews and nieces, have an allowance of EUR 20,000.00

However, the gift tax on real estate depends not only on the allowance, but also on the amount of the gift’s tax rate and the value of the gift. For example, if the value of the gift is EUR 600,000.00 and the recipient has tax class I, a gift tax of 15% is payable on real estate.

If the property is occupied by the recipient himself, no gift tax is payable to real estate

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Additional information on gift tax properties

Many owners or recipients of a property naturally wonder how they can avoid or reduce the gift tax. The easiest way to avoid the tax is to have the recipient inhabit the property himself. In this case, the property can be transferred tax-free. The gift tax can also be reduced by owners requesting an independent report on the current value of the property. The tax office makes only a rough estimate, which may be to the detriment of the recipient.

Owners also have the option to give away the property in individual instalments. The allowances are renewed every 10 years in the case of gift tax. So if you’re smart, you’re giving away half of the property today and the other half in 10 years. In this way, the entire tax can be saved.

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