Selling a property tax-free

The most important facts in brief

• When selling real estate privately, you should observe the speculation period of ten years in order to avoid the due date of speculation tax.

• Speculation tax does not apply to owner-occupied real estate, provided it has been occupied by the owner for the last three years.

• The amount of speculation tax on the sale of a house can be reduced by offsetting the ancillary sales costs against the capital gain.

• When a property is inherited, the speculation period passes from the testator to the heir.

• The sale of three or more properties within a period of five years defines commercial real estate trading, which is accompanied by trade and sales tax.

• Commercial Property Trading: In the event of multiple sales, the tax office may assume commercial property trading (the "3-object rule"); the risk increases significantly starting with four objects within a short period.

When is the sale of a house or an apartment in Germany tax-free?

Income tax (capital gains on real estate) may be due on a property sale if it constitutes a private sale transaction (privates Veräußerungsgeschäft).
A property sale is typically tax-free if:

1. the 10-year holding period has expired. This means at least 10 years must lie between acquisition and sale.

2. the property was used for your own residential purposes during the relevant period (the owner-occupation exception can apply even within the 10 years).
   

   10-year rule for real estate: how the period is calculated
   

   The tax period (speculation period) is generally 10 years. The decisive dates are acquisition and disposal – in practice, the notarised contract is often determinative. With owner-occupation, a sale can be tax-free even within the 10 years. To qualify, you must have lived in the property in the calendar year of sale and the two preceding calendar years. It does not have to be three full years. Even small timing differences can determine whether the gain is taxable.

   So you calculate the taxable gain (simplified):

   Capital gain = Sale price – (Acquisition costs + Selling costs)

   For rented properties: If depreciation (AfA) has been claimed over the years, this reduces the tax acquisition costs – which can increase the taxable gain. Typical straight-line AfA rates are 2.5% for residential buildings up to 1924 and 2.0% for residential buildings from 1925.

   Example: calculating real estate sale tax:

   Sale price EUR 320,000 – (Purchase price EUR 250,000 + Selling costs EUR 10,000) = EUR 60,000 gain

   At a 40% tax rate: EUR 60,000 × 40% = EUR 24,000 tax
   

   Tax-free sale of owner-occupied residential property
   

   The sale of owner-occupied residential property is tax-free. If you wish to sell a rented property without speculation tax, you should allow the ten-year speculation period to elapse in order to realise a tax-free gain on the sale. If this is not possible, declare owner-occupation (Eigenbedarf). This allows you to use the property in the calendar year of sale and in the two preceding years, and then sell it tax-free.
   

   Commercial real estate trading: understanding the three-object rule
   

   A common pitfall: If you sell multiple properties, the tax office may classify you as a commercial real estate trader – with very different tax consequences.

   The well-known “three-object rule” is typically understood in case law as follows: As long as fewer than four properties are sold, there is generally no commercial real estate trading. From four properties sold within a short period (often around five years between acquisition/construction and sale), there are strong indications of commercial activity.

   This matters for anyone who regularly sells properties privately or restructures a portfolio: Even if individual sales appear “private,” the overall assessment can lead to a different classification.

Tax treatment for inheritance or gifting of real estate

In the case of inheritance, the heir generally assumes the testator’s speculation period. If the property had already been owned by the decedent for at least ten years or was used for their own residential purposes, the sale can be tax-free for heirs as well. Inheritance tax may be due independently of this. For gifts, tax allowances and the degree of kinship are decisive.

Good to know:

• Above the allowance threshold, the tax rate ranges between 7% and 30%.

• For gifts to siblings, the allowance is only EUR 20,000 and is taxed at 15% to 43%.

• For spouses, the allowance is EUR 500,000.

• With a subsequent change of tax class, you then pay between 7% and 30% instead of 30% to 50%.

Chain gifts (the property is gifted and then re-gifted to a third party) are permissible according to the Federal Fiscal Court in order to optimise the use of allowances. The requirements for legality are:

• There is no legal obligation on the part of the original owner to make the gift.

• Different gifts must not take place on the same day.

• Each gift must be notarised separately.

For a gift to children, daughters-in-law or sons-in-law, no real estate transfer tax is due. For rented properties, 10% of the fair market value is tax-free.
You can find more details on allowances, structuring options and special cases in the article “Passing on or gifting property: taxes & allowances.”

Selling land tax-free: is it possible?

A special case applies when selling a plot of land. As it is undeveloped land, it cannot have been used as your own residential property beforehand. Therefore, income tax is due on a profitable sale before the end of the speculation period.

Losses: what happens if the sale results in a loss?

If a loss arises on the sale of real estate, tax utilisation is limited and often only possible within the scope of other private sale transactions (highly dependent on the individual case). In case of doubt, a tax review is recommended to avoid relying on incorrect assumptions shortly before completion.

Selling property – with or without a real estate agent?

Selling property with an agent can be advantageous despite additional costs; for example, if you wish to reduce the capital gain from the transaction in favour of a lower tax burden. Agent fees are typically six to seven percent, with buyers and sellers usually splitting the cost equally.

The advantages of working with an agent:

• Price: Often achieves a better sale price through market expertise and negotiation.

• Process: Handles marketing, documentation and coordination – saving time and reducing errors.

• Legal certainty: Ensures a secure process, e.g., through preparation, guidance during the contract process and communication.

Taxes on the sale of real estate from business assets

When a property is sold from business assets, the gain counts toward the company’s profit and is taxed accordingly. Depending on the business structure, trade tax may apply; in addition, income tax or corporate income tax is due depending on the legal form. Special rules may apply to the sale of undeveloped land.

If there is commercial real estate trading, VAT can also play a role – while land transactions are regularly VAT-exempt, an option to tax may be possible under certain conditions. If a business property is inherited or gifted, taxation depends on subsequent use and the transfer route: a withdrawal into private assets can trigger a taxable withdrawal gain. In the case of transfers without consideration, the tax bases/depreciation (AfA) are often carried forward rather than starting “anew” for the acquirer.

How much tax do you have to pay when selling a house?

How much tax is due on the sale of an apartment or house depends on whether it is a private or commercial sale. The following two examples illustrate the taxation of real estate sales:

Example 1

A private owner sells a house for EUR 400,000, which she has owned for four years and not occupied herself. The original purchase price was EUR 250,000, selling costs amount to EUR 20,000. Speculation tax on the sale gain is due, for example 3.5%. The seller’s individual tax rate is 30%.

[400,000 – (250,000 + 20,000)] x 3.5% =
[400,000 – 270,000] x 3.5% =
130,000 x 3.5% = 39,000

Speculation tax of EUR 39,000 applies to the sale price of EUR 400,000. Real estate transfer tax is added: 400,000 x 6.5% = 26,000. The real estate transfer tax is therefore EUR 26,000.

Depending on the situation and federal state, different tax office requirements apply, which is why each individual case should be examined carefully.

Try our free property valuation calculator to get an initial indication.