How is inheritance tax calculated for real estate?
March 5, 2024 | 50,00 EUR | answered by Otto Dornbusch
Dear tax advisor,
My name is Piotr Fischbacher and I am facing the question of how inheritance tax for properties is calculated. My grandmother recently passed away and left me her house. Since I have never dealt with inheritance tax in connection with properties before, I am unsure about how to proceed.
The house has an estimated value of 500,000 euros and there is no will. I am concerned that the inheritance tax could make up a significant portion of the estate and I may not have enough money available to pay it.
Could you please explain to me how inheritance tax for properties is calculated? Are there ways to minimize or avoid the tax burden? Would it be better for me to sell the house to reduce the tax burden? I would appreciate any help and information you can provide on this matter.
Thank you in advance.
Sincerely,
Piotr Fischbacher
Dear Mr. Fischbacher,
I understand your concerns regarding inheritance tax in connection with real estate and would like to help you clarify the situation.
In Germany, inheritance tax for real estate is calculated based on the market value of the inherited property. The market value is the price that a buyer would be willing to pay for the property. This value is determined by an appraisal or can also be estimated based on comparison properties.
For the calculation of inheritance tax, the market value of the property is combined with other inherited assets such as money, jewelry, or securities. There are exemptions that vary depending on the degree of relationship between the deceased and the heirs. For example, the exemption for children is 400,000 euros.
After deducting the exemption, the remaining value is taxed at a rate of 7% to 30%, depending on the relationship you had with your grandmother. For example, if you are a grandchild, the tax rate is usually 15%.
There are ways to minimize or avoid the tax burden. One option is to use exemptions that apply to specific assets, such as the primary residence. Additionally, gifts during one's lifetime may be an option to transfer assets tax-free.
Whether you should sell the inherited house to reduce the tax burden depends on various factors. It is important that you seek comprehensive advice from a tax advisor or lawyer to find the optimal solution for your individual situation.
In any case, I recommend that you contact a tax advisor promptly to discuss all options and correctly calculate and optimize the inheritance tax related to the inherited property.
I hope this information helps you and I am available for further questions.
Sincerely,
Otto Dornbusch
