House sale within 10-year period
September 27, 2012 | 25,00 EUR | answered by Michael Herrmann
Dear Sir or Madam,
My wife and I purchased a semi-detached house at a bargain price in May 2012. Now we would like to sell it again in August 2014, as prices have increased significantly. Until then, her father is living in the attic and contributing towards the utility costs (in kind, such as buying groceries or looking after the children).
- Do we have to partially or fully pay taxes on the capital gains in 2014 as a result? Do we need to fill out any forms?
Furthermore, we have a student living with us through a housing-for-help program. This means she cleans for us 20 hours a month and only pays for her utility costs, not rent (rough estimate of utility costs, no exact breakdown).
- Do we need to pay taxes on the capital gains in 2014 as a result? Do we need to somehow declare the utility costs? It's just one room, so we can't really provide a detailed breakdown. It's just an estimate, as she also uses our kitchen, washing machine, etc.
If we were to rent out another room in the basement, but for a real rent of x euros
- how would the capital gains be taxed in this case? The entire house or only a portion of the profit for the room?
I hope this is not too confusing and I receive a response, as if we had to pay taxes on the capital gains, we wouldn't rent anything out, as it wouldn't be worth it. (the property is in Munich :-))
Dear inquirer,
First of all, thank you for your request, which I would like to answer based on the information provided and in the context of your commitment in an initial consultation. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
The taxation of the capital gains only does not apply if the property is used exclusively for one's own residential purposes in the year of sale and in the two previous years. The term "use for one's own residential purposes" does not include the gratuitous transfer, not even to relatives. Only the gratuitous transfer to a child, for which the taxpayer is entitled to "child benefit or an allowance according to § 32 para. 6 EStG (child allowance)" is considered as use for one's own residential purposes.
If the house is not used for one's own residential purposes during the relevant period, you must pay taxes on the capital gains proportionally. The taxable portion is to be calculated based on square meters and, if necessary, estimated. In the case of only partial temporary transfer of use, the time share must also be taken into account. It is irrelevant whether a fee is paid for the transfer of use.
I hope that these explanations have provided you with a sufficient overview of the situation in the context of your commitment and this initial consultation.
Yours sincerely,
Michael Herrmann
Graduate in Financial Management (FH)
Tax Advisor
