Are there ways to avoid gift tax?
January 11, 2024 | 60,00 EUR | answered by Eiko Hoffmann
Dear tax advisor,
My name is Dietrich Lehmann and I am facing an important decision regarding a possible gift. My parents would like to give me a larger sum of money to support me financially. However, I am concerned about the gift tax that could be incurred.
I have heard that gifts in Germany above a certain value are subject to taxation. Are there ways to avoid or at least minimize this tax? I want to ensure that I do not have to unexpectedly pay high taxes and at the same time, be able to accept the financial support from my parents.
I am wondering if it may be advisable to spread the gift over several years or to utilize certain tax-free allowances. What tax aspects should I definitely consider when receiving a gift and what options are available to reduce the gift tax?
I am grateful for your expertise and hope that you can assist me with this important decision. Thank you in advance for your support.
Sincerely,
Dietrich Lehmann
Dear Mr. Lehmann,
Thank you for your inquiry regarding gift tax. It is understandable that you are concerned about possible tax payments if your parents want to give you a larger sum of money. In Germany, gifts are generally subject to gift tax if they exceed a certain value. However, there are tax-free allowances that allow gifts up to a certain amount to be received tax-free.
Currently, the tax-free allowance for gifts between parents and children is 400,000 euros every 10 years. This means that you can receive money from your parents tax-free up to this amount. If the value of the gift exceeds this allowance, gift tax is due. The amount of tax depends on the relationship between the parties and the value of the gift. The lowest tax rate applies to gifts between parents and children.
To minimize gift tax, you could consider spreading the gift over several years. This way, you could utilize the 400,000 euro allowance every 10 years and reduce the tax burden. Another option is to utilize the allowances for other relationships. These allowances are lower, but so are the tax rates.
Another option is to make a gift with a reservation of usufruct. In this case, your parents transfer the money to you but retain the right to use the assets until their death. This can reduce the tax burden as the value of the gift is reduced.
It is advisable to seek advice from a tax advisor before making a gift in order to clarify the tax aspects and make use of the optimal structuring options. This way, you can ensure that you receive financial support from your parents without having to make unexpectedly high tax payments.
I hope this information is helpful to you and I am available for further questions.
Sincerely,
Eiko Hoffmann
