Tax on house sales (capital gains)

53 posts in this topic

I think I am correct that if you sell your house before 10 years, you are liable for a 10% tax on any profit. I could just about , with gritted teeth, see some justification for it when you got a good tax subsidy on your mortgage, the Eigenheimzulage, but as this has now gone is there any political talk about removing this tax? (yes, I know, Santa might arrive in June this year ...)

 

No wonder people's feet get firmly stuck in the foundations of their houses, never to move again! When we first moved here, somebody practically suggested that we should now book our plot in the village cemetary, ther was total incomprehension when I suggested we may not necessarily stay forever!

 

Not that I want to see UK style property craziness take hold here, but personal circumstances may make it desirable to move within Germany a couple of times more before I turn my toes up. But the expense of moving here is a real off-putter, plus the idea of having to keep track of every tiny receipt or record of work on the house in order to minimize any apparent profit, if you should even be so lucky as to make a profit here!

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if you've lived in the place for longer than 2 years (apparently) there is no capital gains tax to be paid. and also if only you have ever lived there since buying the place, then there is no minimum amount of time.

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As far as I am aware, there is no capital gains tax on a property sale where it is your main residence -- so as long as the house is where you have been living yourself and not a property you have rented, there should be not tax to pay on any profit.

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I think I am correct that if you sell your house before 10 years, you are liable for a 10% tax on any profit.

IMHO its not 10% - its your Individual-Steuersatz that applies - ie the gains are added to your income for that year and taxed accordingly. Can easily surpass 33%.

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Selling your house within the 10 year period generates income from "Privates Veräußerungsgeschäft" according to §23 EStG.

 

 

Ausgenommen sind Wirtschaftsgüter, die im Zeitraum zwischen Anschaffung oder Fertigstellung und Veräußerung ausschließlich zu eigenen Wohnzwecken oder im Jahr der Veräußerung und in den beiden vorangegangenen Jahren zu eigenen Wohnzwecken genutzt wurden

Exception: if you used it the whole time (or at least the year you want to sell it and the two years before) just to live there yourself.

In that case it would not be taxed.

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The house itself probably won't make any capital gain anyway, so you don't need to worry.

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Thats also true here in general although there can be local circumstances that can cause the value to go up or down (like having an Autobahn built on your front doorstep). The latter was a distinct possibility with us but luckily (for us) a different route was chosen - not that construction has started yet...

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we're in the process discussing this matter with an accountant right now.

in our case the property was bought 4 years ago at a 20% reduced rate as there was a tenant. the tenant moved away a year ago and we moved in to renovate.

so it's value is increased already 20% and actually some more as it's been completely renovated.

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ok, in your case MB, you will have had to have lived in your house during the year of sale and also the two previous calendar years.

 

let's say you sell in April. You will have had to have lived in the house from latest December 2006 through till the sales date for you to be exempt from capital gains.

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thanks for the info OG!

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There is no pressure on the politicians here to change the rules regarding capital gains taxes on house sales.

House/Flat prices FELL 1.9% generally here last year. Owning your own flat or house compared with renting

is far from a clear cut decision here.

I know plenty of Germans with a far higher disposable income than me who would not dream of buying property.

The current mania for bringing back the "Pendlerpauschal" is the topic of the day.

That long distance car commuters should be subsidised by people who live close to where they work

is a pretty absurd idea! (but people think differently here)

The German Housing Market works (perhaps by chance) very well. An ample supply of modern property

in a good state of repair and with generally high levels of insulation.

Makes the UK look pretty sad in comparison.

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...it's value is increased already 20%

Are you really sure about that (when prices are generally falling - exception may prove the rule)?

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Yes, that 10 year rule applies for investment properties and not for owner occupied homes. So most folks who only buy a house to live in it, then might sell to move to another place or get a larger/smaller whatever place don't have to worry about extra taxes. It can get interesting if you rent out a part of your house while living in it. Then you need expert advice.

 

 

The current mania for bringing back the "Pendlerpauschal" is the topic of the day.

That long distance car commuters should be subsidised by people who live close to where they work

is a pretty absurd idea! (but people think differently here)

The travel subsidy is meant to keep alive smaller villages and towns that might otherwise disappear due to lack of job opportunities. The village where my in-laws live has one hotel with restaurant, and a small store open a few days a week. Nowhere near enough jobs, so the rest have to commute or move. Considering that Hubby's family has lived there since at least 1598 (documented, but probably longer), I can sort of understand why my sister-in-law doesn't want to move away and would rather drive 100km to work.

 

So in essence, the larger towns and cities are subsidizing the smaller villages and communities that couldn't survive on their own.

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Why shouldn't you be taxed on a profit? 10% seems very reasonable, and well under the taxable rate for most other forms of income...

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we're in the process discussing this matter with an accountant right now.

in our case the property was bought 4 years ago at a 20% reduced rate as there was a tenant. the tenant moved away a year ago and we moved in to renovate.

so it's value is increased already 20% and actually some more as it's been completely renovated.

 

Are you really sure about that (when prices are generally falling - exception may prove the rule)?

yes; the flat was purchased at a special 20% reduced rate (from the total value) as it was occupied with a tenant at the time.

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Why shouldn't you be taxed on a profit? 10% seems very reasonable, and well under the taxable rate for most other forms of income...

IMHO 10% isnt true - its your "personal income tax rate" since the gains would be added on top of your total income for that year then TAXED...

 

 

yes; the flat was purchased at a special 20% reduced rate (from the total value) as it was occupied with a tenant at the time.

That wont necessarily impress any purchaser. I'd believe the 20% gain when I have it in the bank...

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Thanks for your replies and information people. As I said, God forbid that we end up like the UK at its worst; I quite like the stability of things here except obviously I'm not too keen on values actually falling. Having put a lot of work and money into the house at a time when we were blithely unaware of the necessity to keep evey tiny receipt from Obi, any apparent (and unlikely!) profit would be much in excess of reality.

 

 

Why shouldn't you be taxed on a profit? 10% seems very reasonable, and well under the taxable rate for most other forms of income...

IMHO 10% isnt true - its your "personal income tax rate" since the gains would be added on top of your total income for that year then TAXED...

 

As for the travel subsidy,hmm; isn't public transport in the cities subsidised, if you're lucky enough to be able to get to work on it? The reason we bought here in the sticks was because original job was just up the road, children settled in local schools then original company goes bust, no chance of work here; now I have to drive an hour each way to my only possible source of work, OH flies to and from UK. Can't afford to buy a shed in the UK any more after 9 years here! Hence dithering about to move or not to move nearer my work involving major hassle, expense and uncertainty. You have to reckon on paying probably the best part of 10% on top of your purchase price to move, so am not keen to pay anything even a mere 10% at the selling end too!

 

(Sorry I got my quotes and pastes muddled up.)

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IMHO, the OP's primary concern should be how long their family will want to live in the property, and how easy/difficult it will be to sell the property when and if they decide to do so. Also, consider the inheritance taxes on property if you are planning to buy and hold the property for the rest of your days.

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That wont necessarily impress any purchaser. I'd believe the 20% gain when I have it in the bank...

hmm...well they sold all the flats in the block at the same time (they belonged to one company) ours was the only one with the 20% reduction as the present tenant (an employee of said company) didn't want to buy it. we already have a rough quote for what it is worth now and it appears to be about right, not even taking into account renovations done in the meantime.

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IMHO 10% isnt true - its your "personal income tax rate" since the gains would be added on top of your total income for that year then TAXED...

a capital gain is an income that hasn't yet been taxed, so it is only fair that it should be. Why do you think that income from property speculation should be treated differently from share speculation or from your normal salary? Should people who buy and sell property for a living or share traders not pay income tax?

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