Inheritance or gift tax: This is how homeowners can avoid the tax authorities

Created: 2022-12-07 04:46

By: Lisa Mayerhofer

The inheritance tax for real estate also depends on how closely the respective heir is related to the testator.

(Archive image) © Christin Klose/dpa-tmn

At the turn of the year, due to a change in the law, real estate heirs may face higher costs for inheritance tax.

However, there are ways to avoid inheritance and gift tax.

Berlin – Will inheritance and gift tax be increased through the back door in the coming year?

At least that's what Bavaria fears and calls for legal changes in the annual tax law.

This provides for the tax assessment of real estate to be partially reorganized.

In the future, real estate values ​​should therefore also have to be determined as close as possible to the "fair value", i.e. the sales value, for tax purposes.

This means: In the case of an inheritance, the sales value of a house would be applied - and due to the enormous price increases on the real estate market in recent years, this can mean that suddenly a much higher inheritance or gift tax is incurred than before.

For example, single-family homes in boom regions would then easily exceed the allowances for gift and inheritance tax many times over.

Inheritance tax: Bavaria sees a need for reform 

Bavaria has therefore submitted an application to the Bundesrat, demanding a legal regulation that will in future enable the state parliaments to decide on essential aspects of inheritance and gift tax on their own authority.

In particular, the states should be able to determine the amount of the personal allowances independently, especially since they are entitled to the full revenue from inheritance and gift tax.

Bavaria's Finance Minister Albert Füracker (CSU) had already spoken out in favor of higher inheritance tax allowances.

Federal Finance Minister Christian Lindner (FDP) also said last week that he thought it would be advisable to regularly adapt this, like other parts of tax law, to general price and cost developments.

The financial policy spokesman for the FDP parliamentary group, Markus Herbrand, told the German Press Agency last Thursday that the initiative from Bavaria was the right one.

She rightly addresses the risk of increasing burdens in the course of the legally necessary adjustment of the valuation criteria for real estate to the real estate valuation regulation from last year.

"It must also be ensured in the future that the inherited house in a major German city does not become a debt risk, which is then solved by selling it to the investor who bids the most." The proposed regionalization of the allowances could mean special challenges, for example in real estate boom metropolises like Munich, Berlin or Frankfurt.

Inheritance tax: how it works

The inheritance tax depends on how closely the respective heir is related to the deceased.

Spouses (also registered life partners) can inherit up to 500,000 euros tax-free, for each child there is an allowance of 400,000 euros.

Parents who inherit from their children, on the other hand, only receive an allowance of 100,000 euros, and those who can show that they are more distantly related or not related to the deceased must make do with an exemption of 20,000 euros.

Everything that goes beyond the respective exemption amount must be taxed at different tax rates, which again depend on the degree of relationship and the amount of assets.

This is how inheritance tax works

Example: You inherit a house worth 500,000 euros from your mother.

As their child, you are entitled to an allowance of 400,000 euros, so you have to pay tax on 100,000 euros - because you are closely related at the lowest tax rate of eleven percent.

That means you have to pay 11,000 euros to the tax authorities for the inheritance.

If the house was worth a little over a million euros, you would have to shell out 90,000 euros, because then the tax rate is 15 percent.

also read

When the 300 euros of the energy flat rate really end up in pensioners' accounts

Property tax “unconstitutional”: law professor advises owners in several federal states to sue

The detour via the donation

However, there is no inheritance tax if the deceased used the property himself until his death and you, as a closely related heir, have lived in the property for at least ten years.

But there are also other ways of avoiding inheritance tax – for example with the help of gift tax, for which the same allowances usually apply.

Inheritance and gift tax are regulated in the same law of German tax law.

But if you give away your property, you can do this in several tranches, for example for a house whose value exceeds the allowances for future heirs.

In this way, the parental home can be given away piece by piece over a period of ten years within the framework of the allowances.

With material from the dpa