What are the tax implications of selling real estate as an investment?
January 4, 2022 | 40,00 EUR | answered by Anna Karpinski
Dear Tax Advisor,
My name is Claudia Pasche and I have a question regarding the tax implications of selling properties as investment properties. I own several properties that I have acquired as investment properties in recent years. Now I am considering whether it might be sensible to sell one or more of these properties. However, I am unsure about the potential tax consequences of such a sale.
Currently, I am classified in personal income tax class 2 and have not yet sold any property as an investment. I have heard that when selling properties as investment properties, taxes may be due on the profit made. Since I have acquired my properties at different times, I wonder if the tax implications vary depending on the holding period of the property. Additionally, I am wondering if there are ways to minimize or avoid the tax burden.
My concern is that through a hasty sale of my properties, I may have to pay high taxes and therefore lose a significant portion of the sale proceeds. Therefore, it is very important for me to understand what tax aspects I should definitely consider when selling properties as investments and how I should proceed to reduce the tax burden if possible.
Could you please explain in detail what tax implications arise from selling properties as investment properties and what options exist to minimize or avoid potential taxes?
Thank you in advance for your help.
Sincerely,
Claudia Pasche
Dear Mrs. Pasche,
Thank you for your inquiry regarding the tax implications of selling investment properties. It is understandable that you are unsure and concerned about possible tax burdens when you want to sell one or more of your properties. I will be happy to explain in detail the tax aspects you should consider and the options available to minimize or avoid the tax burden.
In general, capital gains from the sale of investment properties are subject to income tax. The capital gain is calculated as the difference between the selling price and the acquisition cost of the property. Depending on the holding period of the property, the tax consequences may vary. For properties held for more than 10 years, you can benefit from a tax exemption. In this case, no tax is due on the capital gain. However, for properties held for less than 10 years, the speculation period applies. In this case, you must pay tax on the capital gain, but depending on your personal tax rate, a favorable taxation may apply.
There are various ways to minimize the tax burden. One option is to use the so-called tax-free allowance for capital gains. Currently, this is €600 per year and applies to all sales transactions, not just properties. Additionally, you can deduct expenses related to the sale of the property, such as broker fees, notary costs, or maintenance expenses. These costs reduce the capital gain and therefore the tax burden.
Another way to reduce the tax burden is to use tax planning opportunities. It may be useful to consult an expert to determine the market value of the property and possibly claim depreciation. You can also check whether there are any tax benefits, such as those related to monument protection or energy-efficient renovation.
It is important that you seek professional advice before selling your investment properties to assess the tax implications and take measures for tax optimization if necessary. I recommend scheduling a consultation appointment to discuss your individual situation and develop the best possible approach together.
I hope this information has been helpful and I am available for any further questions.
Best regards,
Anna Karpinski
