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Real estate and taxes: Pay attention and save money!

Pay attention and save money!

When it comes to investments, buying a property is one of the most important forms. Whether in the commercial or private sense, the purchase of property is worthwhile as an investment. As a secure investment, an acquisition offers many advantages over other forms of investment. This is even if the property is financed by the bank. In terms of retirement provision and future insurance, real estate investment is one of the safest and sometimes most sensible options. But how is such an investment to be considered for tax purposes? What taxes are paid to the tax office? How can taxes be saved?

What are the taxes?

In Germany, you are obliged to pay taxes when buying a property. This is the case with almost all investments or investments that generate returns or profits. The German tax law is far from uncomplicated. Many do not know the legal basis and turn to their tax advisor. This is even appropriate in some cases, because a good tax advisor not only clarifies the current tax aspects, but can also help to save taxes. For those who already own real estate, it is worth supporting a tax advisor.

The real estate transfer tax

Whether an apartment or a house is used or rented out to third parties, a property transfer tax must be paid. It is one of the acquisition costs of a property and is due at the time of purchase. This is less about the house being built, but more about the land. Therefore, the property transfer tax must be paid even if the land is still empty. Nationwide, a uniform tax burden of 3.5 could be expected by 2006. Currently, however, this rate is determined individually, depending on the state. In Bavaria and Saxony, however, these tax rates are still 3.5, unlike in:

  • Nrw
  • Schleswig Holstein
  • Thuringia
  • Saarland
  • Brandenburg

Here, the current rate for real estate transfer tax is already 6.5, which is significantly higher. Other current property transfer tax rates:

  • Baden-Württemberg 5.0
  • Berlin 6
  • Bremen 5
  • Hamburg 4.5
  • Mecklenburg-Vorpommern 5.0
  • Lower Saxony 5.0
  • Rhineland-Palatinate 5.0
  • Saxony-Anhalt 5.0

The real estate transfer tax is calculated on the basis of the purchase price. Both buyers and sellers are liable for tax. As a rule, however, the purchase contract with the notary stipulates that the buyer must pay the real estate transfer tax. In general, however, this can also be done by the seller, which is rather unusual.

After payment of the tax, the buyer receives a certificate of safety from the tax office. The buyer therefore requires these for entry in the land register. Only then can the buyer be described as the rightful owner of a property. It is therefore not possible to avoid the real estate transfer tax, but it is only to be paid to the tax office once.

Long-time experienced real estate agents wanted for existing customer support!

The property tax

Property tax is also part of the property tax. It should not be confused with the real estate transfer tax, which is due immediately before registration in the land register. The property tax is levied once a year on real estate and determined by the respective municipalities. In Germany, therefore, this tax rate also varies according to the Land. It is determined by a lifting rate, which depends on the value of the land. The type of land development, as well as the location and size of the property built, also play a role and affect the lifting stock.

If the property is rented out, the property tax can be transferred to the tenant. If the apartment or house itself is inhabited, it must be paid for by the owner. In the event of a rental default for which the landlord is not to blame, a property tax exemption can be applied for. For this purpose, the landlord must contact the competent municipality.

In recent years, the rates for property tax have risen considerably, as have those of the real estate transfer tax. Germany can even be described as the frontrunner here. The purchase of real estate can therefore cause quite high incidental costs and tax costs, which should be taken into account.

The speculative tax

If a property owner sells his private property, a speculative tax may be due. Private divestitures are generally taxable, even when it comes to real estate. The amount of the capital gains and the income tax rate play a role in the calculation of the tax rate.

Exceptions, however, also confirm the rule here, because a speculative tax does not always have to be paid. For example, if there are more than 10 years between the purchase of the property and the sale. Now the period of speculation would have expired and the sale is tax-free. If the property was used in the year of sale and the previous two years (own use), the income from the sale also does not have to be taxed.

Inheritance tax

In Germany, the inheritance tax regime has been in place since 1906. So if you inherit a property, for example on the basis of a will, you have to pay this type of tax. However, the heir is entitled to a fixed allowance, which may be deducted from the tax. The height is measured by the degree of kinship.

If a spouse dies, the allowance is EUR 500,000. If a parent dies and the inheritance passes to the children, the allowance for them is 400,000 euros. The same applies even if it is a stepchild. If the grandparents inherited from the grandson, the free limit amounts to 100,000 euros. All underlying conditions are only subject to a free limit of 20,000 euros.

The current market value of the property naturally also plays into the amount of inheritance tax. However, the price for which the property could be sold at the current level is used. It does not matter whether you bought the house or the apartment for a fraction of that amount, for example, 50 years ago. Current market prices will determine inheritance tax. It is of course important to have expert experts to estimate the property. Valuation can, after all, have a devastating effect on the level of taxes, so you could probably overpay if it is misjudged.

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How to save taxes with investment properties

Anyone who uses real estate as an investment, or who fulfils your dream of owning a home, can save taxes on both sides. In the case of investments, there are even many possibilities for this, so it is worth thinking about. At the beginning, the acquisition costs can already be claimed and depreciated at the tax. Acquisition costs arise when purchasing the property. However, it is important that these can only be deducted for tax purposes at a certain percentage of the purchase price and only for one year.

EXKURS;In the investment real estate segment or transactions in the million segment, many properties are handled in the share deal procedure. Since there is no land register sale, but only a brokerage of shares in the company, no real estate transfer tax is payable.

How to save taxes with investment properties

Anyone who uses real estate as an investment, or who fulfils your dream of owning a home, can save taxes on both sides. In the case of investments, there are even many possibilities for this, so it is worth thinking about. At the beginning, the acquisition costs can already be claimed and depreciated at the tax. Acquisition costs arise when purchasing the property. However, it is important that these can only be deducted for tax purposes at a certain percentage of the purchase price and only for one year.

EXKURS;In the investment real estate segment or transactions in the million segment, many properties are handled in the share deal procedure. Since there is no land register sale, but only a brokerage of shares in the company, no real estate transfer tax is payable.

Other ways to deduct the cost of the property for tax use:

  • Maintenance and maintenance costs
  • Administrative expenses
  • Costs of waste collection
  • Caretaker costs
  • Cleaners
  • Assembly and repair work

Important: Costs that do not relate directly to the property cannot be deducted. In this way, it is assumed that soil surface cannot be weared off and thus does not lose its value.

Info: Depreciation is made in Appendix V of the tax return under special depreciation.
If you are not sure, you can hire a tax advisor who will keep an eye on all possible depreciation and tax savings. The owner’s capital and financing naturally also play a role in taxes, as does the nature and condition of the property itself.

Special write-offs may also include special cases, such as those for listed properties or listed buildings. Here, the state consciously supports the maintenance effort and the time investment in these properties. The preservation of historic buildings is also supported by the state. In this way, the renovation costs incurred can be deducted over 12 years. However, in order to be able to use these depreciations, the property must have been purchased before various renovation works. If these are already in progress, tax advantages are no longer possible.

Investing in a secure future

The E1 Investments concept offers a proven system for the solid development of a business as a broker and owner of a real estate business. E1 Real Estate has the infrastructure and operating systems that enable us to offer first-class services with a team of brokers. You are investing in the market of the future.

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