What tax rates apply to inheritance tax?
January 2, 2024 | 45,00 EUR | answered by Otto Dornbusch
Dear tax advisor,
My name is Lilli Eiserfelder and I am facing a complicated situation regarding inheritance tax. My father recently passed away and has left me his house. Now I am wondering what the tax rates for inheritance tax are and how much they will amount to for me.
My father has bequeathed the house to me alone, as I am his only child. The estimated value of the house is 500,000 euros. However, I am worried that the inheritance tax could make up a significant portion of the inheritance and thus put me in financial difficulties.
Could you please explain to me in more detail what the tax rates for inheritance tax are and how they are applied to the value of the house? Are there ways to reduce or avoid the tax burden? What steps should I take in this situation to best secure my financial situation?
I thank you in advance for your help and look forward to your assistance in resolving this important matter.
Sincerely,
Lilli Eiserfelder
Dear Mrs. Eiserfelder,
I would like to assist you with your concerns regarding inheritance tax. First and foremost, my sincere condolences on the loss of your father. It is understandable that you are worried about the financial implications of inheritance tax, especially when it comes to a house worth 500,000 euros.
In Germany, inheritance tax is levied based on the Inheritance and Gift Tax Act. For children, there is an exemption of 400,000 euros, meaning that no inheritance tax is due up to this amount. The amount exceeding this exemption is taxed at a progressive rate.
For children, the tax rate on a value of 500,000 euros, for example, is 15%. This means that 15,000 euros of inheritance tax would be due on the 100,000 euros exceeding the exemption.
However, there are ways to reduce or avoid the tax burden. One option is to use exemptions. In addition to the exemption for children, there are also exemptions for spouses and other relatives. Additionally, lifetime gifts can be a way to avoid inheritance tax.
Another option is to use tax planning strategies, such as transferring assets in the form of usufruct or using tax-optimized testament formulations.
To secure your financial situation as best as possible, I recommend that you promptly consult a tax advisor to discuss your individual situation and develop the best possible strategy together. A tax advisor can help you minimize the tax burden and protect your inheritance as effectively as possible.
I hope this information is helpful to you and I am available to answer any further questions you may have.
Sincerely,
Otto Dornbusch
