Do I have to pay gift tax if I transfer a property to my nephew?
January 3, 2024 | 55,00 EUR | answered by Eiko Hoffmann
Dear tax advisor,
My name is Lukas Lauer and I am considering giving my nephew a property as a gift. The value of the property is 500,000 euros. My nephew is my only relative and I would like to provide him with financial support by transferring the property to him.
However, I am unsure whether I would have to pay gift tax if I give the property to my nephew. I have heard that gifts to relatives are tax-favored, but I am not sure if this also applies to real estate. I am concerned that gift tax could amount to a significant portion of the property value and disrupt my financial planning.
Can you please advise me on whether I would have to pay gift tax if I transfer the property to my nephew? Are there any ways to avoid or minimize gift tax? I would greatly appreciate your support and guidance on this matter.
Thank you in advance.
Sincerely,
Lukas Lauer
Dear Mr. Lauer,
Thank you for your inquiry regarding gift tax in relation to the transfer of a property to your nephew. It is understandable that you are concerned about possible tax payments and how you can potentially avoid or minimize them. I would be happy to provide you with detailed information on this matter.
In Germany, gifts are subject to gift tax, which is levied by the tax office. In your case, the value of the gift amounts to 500,000 euros. However, there are tax-free allowances that can be claimed for gifts to relatives. For nephews, the tax-free allowance is currently 20,000 euros. This means that the value of the property will be taxed minus the tax-free allowance of 20,000 euros.
So in your case, 480,000 euros (500,000 euros - 20,000 euros) would be taxed. The specific amount of gift tax depends on the tax class in which your nephew is classified. Relatives in tax class II, including nephews, pay a tax rate of 15% up to a value of 75,000 euros, 20% up to a value of 300,000 euros, and 30% over 300,000 euros.
To minimize gift tax, you could, for example, spread the gift over several years. This way, you could utilize the tax-free allowance each year and reduce the tax burden. Another option would be to make a gift with reservation of usufruct, where you retain the right to use the property. This reduces the value of the gift and, therefore, the tax burden.
However, it is important that you seek detailed advice from a tax advisor to find the best solution for your individual situation. Every case is different, and there are various legal options available to minimize gift tax.
I hope this information is helpful to you and I am available for further questions.
Sincerely,
Eiko Hoffmann
