Ask a tax advisor on the topic of Real estate taxation

Capital gains tax on real estate sale (condominium)

November 11, 2012 | 50,00 EUR | answered by Dr. Yanqiong Bolik

Dear Sir or Madam,

In February 2010, my sister and I jointly purchased a condominium in Hamburg (financed with equity, shared 50% : 50%), which my sister has been living in alone since then.

I have been living in the Frankfurt area as a tenant before and since the purchase of the property (main residence, without any additional secondary residences).

Now my sister wants to move back to southern Germany and we both agree that we do not want to rent out the apartment at such a distance. Therefore, we plan to sell it promptly (expectedly in early 2013). Since the square meter prices have risen, we expect to make a profit from the sale of the condominium.

Since my sister has continuously lived in the property since the purchase and has also lived in it herself in the year of the sale (expectedly in early 2013) and the two previous years (2010 + 2011 + 2012), she will not have to pay taxes on any potential profit from the sale.

I am now wondering if I am also exempt from paying taxes on the profit potentially generated from the sale of the condominium? Are there any tips I should consider in this regard?

Although I have not lived in the apartment myself, I have used it personally. I have not received any rental income and have given my share of the apartment to my sister for free. I have financially contributed to the maintenance costs (although not at a 50 : 50 ratio). Occasionally, I have used the apartment as a "holiday residence."

I look forward to your response and remain with kind regards!

Dr. Yanqiong Bolik

Dear questioner,

Thank you for your inquiry, which I am happy to answer taking into account your input and the rules of this platform.

Please note that my explanation is based on the facts presented, and that adding, omitting, changing information, or the ambiguity of information can change the tax result.

It is correct that profits from the sale of owner-occupied residential property are not subject to income tax, even if the sale occurs within the 10-year period (§23 para. 1 no. 1 sentence 3 Income Tax Act). Personal use as an owner is required for this purpose. According to the wording of the law, even a temporarily self-used second home is fully favored. Providing a property free of charge to children eligible for child benefit is not harmful. Providing a property free of charge to other family members is harmful.

Therefore, you should verify again whether you are allowed to use this property for your own residential purposes. The property must be determined and suitable to provide you with permanent residence and accommodation. It is irrelevant how often you actually stay in the property. If it does not serve your own residential purposes, the profits from the sale of your share in residential property are subject to tax.

I hope I could assist you.

If there is still uncertainty, please feel free to use the follow-up function.

Best regards,

Dr. Yanqiong Bolik
Tax consultant

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