Passing on real estate within the family
Selling real estate within the family can have various advantages and is considered an interesting alternative to bequeathing or giving away the property. For example, if the gift allowance has already been exhausted, it is possible to sell the apartment or house within the family. However, there are a few points to bear in mind and these should be carefully considered in advance. The tax aspects are particularly important because, as with any sale, there is a tax burden when selling to family members.
Advantages of inter-family real estate sales
If you sell your home to a family member, for example to your own child, you can be sure that the property will remain in safe family ownership. In addition, this can prevent possible discrepancies in the event of inheritance, as the ownership structure is clearly regulated and notarized. Furthermore, the owner-occupation rule, which exists in the case of inheritance and which states that heirs must move into the property immediately after the death of the parent, no longer applies. In addition, you avoid gift and inheritance tax if you sell or buy a property within the family. Especially when selling to your own children, there is also no real estate transfer tax. As a seller, selling within the family gives you the financial means to fulfill personal wishes or move into an age-appropriate home during your lifetime. In addition, renovation and refurbishment measures can be claimed as income-related expenses in the income tax return, provided the selling parents live in the house transferred to the buyer for rent.
Mit diesen Kosten müssen Sie rechnen
Selling an apartment or house within the family is basically associated with the same costs as selling a property to other parties. The exception is land transfer tax, which does not apply when selling to your own children. Notary and land registry costs as well as the costs of the energy certificate must therefore be taken into account. If a property valuation is to be carried out prior to the sale – which is generally advisable – the costs for preparing the valuation report should also be taken into account. If a loan is taken out to finance the property and the loan is terminated prematurely, the bank may charge a prepayment penalty for the loss of interest income. However, this does not apply if the house has already been paid off.
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Tax implications of the sale
If you are planning to sell a house or apartment within the family, there are a number of important tax issues. Although no real estate transfer tax is payable on the sale of a house to relatives in the direct line, it is payable on all other inter-family sales. In addition, family members who sell or buy a property are also subject to speculation tax if they do not wait for the ten-year period to expire. This means that anyone who resells their home within ten years of building or buying it must pay income tax, also known as speculation tax, on the resulting profit. This also applies to the sale of a condominium within the family. However, the tax can be avoided if the property has been owned for at least ten years and has been continuously occupied by the seller or if the seller has lived in the property in the year of sale and two previous years if it was previously rented out.
If you want to sell a property below its value within the family, you should always bear in mind that a price that is too low may lead to difficulties with the tax authorities. Under certain circumstances, the sale may be regarded as a hidden gift or a sham purchase, which may result in the obligation to pay gift tax.
There are various ways to keep a home in the family. These include the sale of a property within the family, a gift or an inheritance. Gift tax is payable when a property is given away if certain tax-free amounts are exceeded. Heirs must expect to pay inheritance tax.There are various ways to keep a home in the family. These include the sale of a property within the family, a gift or an inheritance. Gift tax is payable when a property is given away if certain tax-free amounts are exceeded. Heirs must expect to pay inheritance tax.
A sale between parent and offspring is always possible in principle and follows the same requirements as a property sale outside the family. This means that a contract must be drawn up, a notary must be consulted and a corresponding entry must be made in the land register. However, some costs are not incurred here. For example, no estate agent fees are due and no land transfer tax has to be paid when selling to direct relatives.
To be able to sell a property tax-free, the owner must have lived in it exclusively since the end of construction or the date of purchase. This saves you as the seller the speculation tax on the profit from the sale. If you have rented out the property, you must have owned it for at least ten years and have lived in it yourself in the two years prior to the sale and in the year of sale in order to avoid this tax. If no profit was made on the sale, there is also no tax charge.
Every time a property changes ownership, a notary must be called in to notarize the contract and arrange for the land register entry. The notary is obliged to notify the tax office within two weeks. This takes place regardless of whether the transaction is exempt from taxation or not. As a rule, the tax office responds relatively soon after the notarized purchase agreement has been concluded and issues the corresponding tax assessment notices.
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