Are you expecting an inheritance and wondering what the tax burden will be? Inheritance tax, especially on real estate, can quickly become a financial challenge. This guide will show you how, as a child or spouse, you can maximise your benefits and avoid costly mistakes.
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The topic briefly and concisely
Spouses have an inheritance tax allowance of €500,000 and children of €400,000, which significantly reduces the tax burden.
The owner-occupied family home can be completely inherited tax-free by the spouse, provided it continues to be used for another 10 years.
A professional property valuation can correct the value often set too high by the tax office and thus save taxes directly.
Did you know that in Germany, assets worth up to 400 billion euros are inherited annually, much of it in real estate? However, many heirs are surprised by the amount of inheritance tax they face. As closest relatives, children and spouses enjoy the highest allowances and lowest tax rates. With the right knowledge about valuation methods, maintenance allowances, and the special regulation for the family home, you can significantly reduce your tax burden. This article serves as a practical calculator and guide to help you securely plan your financial future in the event of an inheritance.
Basics of Inheritance Tax: Understanding Tax Classes and Rates
The amount of inheritance tax depends on the degree of kinship, which is divided into three tax classes. Spouses, registered partners, and children fall into the most favourable tax class I. This grants them not only the highest allowances but also the lowest tax rates, ranging from 7% to 30% depending on the asset value. For comparison: heirs in tax class III (non-relatives) pay tax rates of 30% to 50% on amounts exceeding their allowance of only 20,000 euros. Correct classification is the first step in calculating the potential tax burden. This scaling demonstrates how the legislator protects the immediate family.
Maximise allowances for spouses and children
Personal allowances are the most important tool for reducing inheritance tax. For spouses and registered partners, an allowance of 500,000 euros applies. Each child (including stepchildren and adopted children) can inherit assets worth 400,000 euros tax-free. Grandchildren have an allowance of 200,000 euros, unless the relevant parent has already passed away – then they inherit the allowance of 400,000 euros. These allowances can also be used for gifts every 10 years, facilitating early estate planning. A precise understanding of these amounts is essential, as you can see in the inheritance tax calculator. Beyond these personal allowances, there are further reliefs often overlooked.
The additional pension allowance as further protection
In addition to the personal allowance, the legislator grants spouses and children a special maintenance allowance. This is intended to compensate for the potential loss of support payments. For the surviving spouse, this is a flat rate of €256,000. For children, the amount is staggered by age and granted up to the age of 27. The staggered amounts are as follows:
Children up to 5 years: €52,000
Children aged 6 to 10 years: €41,000
Children aged 11 to 15 years: €30,700
Children aged 16 to 20 years: €20,500
Children aged 21 to 27 years: €10,300
This allowance is reduced if the heir receives tax-free maintenance benefits such as a widow's or orphan's pension. Accurate calculation is crucial to determine the tax burden precisely, especially when property values exceed personal allowances.
Real Estate in Estates: How the Tax Office Determines the Value
If a property is part of an estate, its valuation is crucial for calculating taxes. The tax office determines the so-called "fair market value" (market value) using standardised methods such as the comparative value, income value, or intrinsic value method. However, these blanket valuations often do not take into account individual depreciation factors like renovation backlogs or an unfavourable location. A deviation of just 15% in the valuation of a 600,000-euro property can increase the tax burden by over 10,000 euros. An accurate valuation report can help here. Taxpayers have the right to prove a lower market value through an expert report and thus reduce the tax base. This is an important step before considering further tax exemptions.
Special Case Family Home: Inherit Tax-Free Under These Conditions
One of the most significant tax exemptions is for the so-called family home. If the deceased passes on the property they lived in until their death to their spouse, no inheritance tax is due on it – regardless of its value. The condition is that the inheriting partner must live in the property themselves for at least 10 years. Giving up its use, for instance through sale or rental, retroactively leads to the loss of the tax exemption unless there are compelling reasons, such as the need for care. If children inherit the family home, the exemption also applies, but only for a living area of up to 200 square metres. For larger properties, the exceeding portion must be taxed. Correct property valuation in the event of inheritance is essential here. This regulation offers enormous savings potential but requires careful planning of future use.
Calculation examples: How the tax affects practice
Theoretical rules become more understandable through concrete figures. Here are two typical scenarios illustrating the application of tax-free allowances and tax rates:
Scenario 1: Child inherits property
A child inherits a property valued at 550,000 euros. After deducting the personal allowance of 400,000 euros, 150,000 euros of taxable assets remain. In tax class I, a tax rate of 11% applies to this amount, resulting in an inheritance tax of 16,500 euros.Scenario 2: Spouse inherits assets
A spouse inherits total assets worth 800,000 euros. Thanks to the personal allowance of 500,000 euros and the maintenance allowance of 256,000 euros (provided no pension claims are accounted for), the inheritance exceeds the allowances by only 44,000 euros. Taxes are levied at 7% on this amount, equalling 3,080 euros.
These examples demonstrate the importance of an accurate determination of the market value to correctly calculate the tax burden.
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The inheritance tax for children and spouses is complex, but offers significant planning opportunities due to high allowances and special provisions. The key to minimising the tax burden lies in a thorough knowledge of the allowances (€500,000 for spouses, €400,000 for children), the correct application of additional allowances such as the maintenance allowance, and the strategic use of the family home exemption. Particularly with real estate assets, an accurate, market-based valuation is crucial to avoid an excessive assessment by the tax office. A data-driven property valuation from Auctoa or an initial analysis with our ImmoGPT-Chat can quickly provide clarity here. Act proactively to best protect the inherited wealth.
Additional useful links
Gesetze im Internet provides direct access to the Inheritance Tax and Gift Tax Act (ErbStG) of 1974.
Gesetze im Internet hosts the main page of the Inheritance Tax and Gift Tax Act (ErbStG).
The Federal Ministry of Finance offers comprehensive information on inheritance and gift tax.
Wikipedia provides an overview of the Inheritance Tax and Gift Tax Act.
Wikipedia explains the specifics of inheritance tax in Germany.
Finanztip provides a comprehensive guide on inheritance tax.
Finanztip looks into the topic of inheritance tax, especially for children.
Finanztip offers specific information on inheritance tax for real estate.
The Sparkasse provides a helpful guide on inheritance tax.
The Sparkasse explains the applicable inheritance tax allowances in detail.
FAQ
What is the difference between the personal allowance and the support allowance?
The personal allowance is a general tax-free allowance on inheritance (e.g., €500,000 for spouses). The maintenance allowance (e.g., €256,000 for spouses) is added and is intended to compensate for the loss of maintenance payments. However, it can be reduced by pension benefits.
Does the allowance for the family home also apply to gifts?
Yes, the tax exemption for the family home also applies to gifts during one's lifetime, but only between spouses. A gift of the family home to children is not exempt from tax; their tax-free transfer is only possible in the case of inheritance.
What happens if I need to sell the inherited family home before the 10-year period ends?
If you relinquish the family home within 10 years, the tax exemption will be revoked retroactively. An exception is made if you are prevented from using it yourself for compelling reasons (e.g., proven need for care).
Can I challenge an overvaluation of real estate by the tax office?
Yes. If you believe that the value set by the tax office for your inherited property is too high, you can demonstrate the 'lower market value' with a qualified appraisal from an expert. This is generally accepted by the tax office.
Does a second home also count as a family home?
No, only the property that demonstrably represents the centre of family life is considered a family home. Holiday homes or second homes are excluded from the tax exemption for family homes.
How often can I use the inheritance tax allowances?
The personal allowances for inheritances and gifts can be fully claimed anew every 10 years. This is the basis for a long-term, tax-optimised transfer of assets.
