You have inherited a house, but the inheritance tax exceeds your available funds? The law offers a solution to protect your new home. Learn how you can legally defer the payment of inheritance tax for a self-used property for up to 10 years.
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The topic briefly and concisely
The inheritance tax on a property used as a primary residence can be deferred interest-free for up to 10 years upon request.
The condition is that the heir can only raise the tax by selling the inherited property.
The deferral ends immediately if the property is no longer used by the owner or is sold.
An inheritance often involves a property, but rarely the necessary cash for the due inheritance tax. Are you also facing the question of how to manage the tax burden of tens of thousands of euros without having to sell the inherited parental home? It is precisely for this situation that the legislator has created a protective regulation: the deferral of inheritance tax according to § 28 of the Inheritance Tax and Gift Tax Act (ErbStG). This article shows you how to take advantage of this option to bridge financial gaps and secure your property inheritance.
The Essentials: Deferral as a Shield
The deferral of inheritance tax for a self-occupied property is a legally enshrined right designed to protect heirs from a forced sale. Here are the key points:
Up to 10 Years Deferral: The tax on the property can be deferred for a maximum of ten years upon request.
Interest-Free on Inheritance: If the acquisition occurs through inheritance, the deferral is completely interest-free.
Condition of Self-Occupation: The deferral is valid only as long as you actually inhabit the inherited property yourself.
Proof of Necessity: You must demonstrate that paying the tax would only be possible by selling the property.
This regulation gives you the necessary time to settle the tax debt without losing the family home.
Check the requirements for deferral in case of self-use
To obtain a deferral of inheritance tax for a self-used property, you must meet several criteria that the tax office will thoroughly examine. The legislator aims to promote the preservation of living space with § 28 Sec. 3 of the Inheritance Tax Act (ErbStG). The first hurdle is the type of property and its use. Acquisition due to death is favoured if it is a single- or two-family house, or residential property that you, as the heir, use immediately for residential purposes. Since a change in legislation on 1st January 2025, this applies to all types of self-used residential property. The biggest challenge is proving that you can only settle the tax debt by selling the inherited property. To this end, the tax office examines all your own and inherited assets. Even the theoretical possibility of taking out a loan can lead to the rejection of the application. Therefore, precise knowledge of the market value of your property is essential. This examination ensures that only heirs who are genuinely in a financial predicament benefit.
The Application: How to Apply for a Deferral Correctly
The application for deferral is a formal process that requires care. You should submit the application directly along with your inheritance tax return to the relevant tax office. A late application carries the risk that the tax may already become due. For a successful application, you must transparently disclose your financial situation. This includes a detailed breakdown of all your assets. The following documents are crucial:
Complete asset listing: List all assets, including bank balances, securities, and additional real estate assets.
Proof of private use: Provide a registration certificate or other documents that verify your moving in.
Justification of necessity: Explain in writing why the tax payment is not possible without selling the property.
Current property valuation report: An impartial report substantiates the property's value and the tax burden on it. The role of a valuation report in an inheritance is central in this context.
An incomplete application almost always leads to queries and delays of several weeks. The precise calculation of the proportional tax on the property is complex, which is why an inheritance tax calculator can offer initial guidance. This ensures that your application is solidly based from the outset.
Duration and End of the Deferral: What You Need to Consider
The deferral is granted for a maximum of ten years, is interest-free on inheritances, and ends as soon as the prerequisites no longer exist. The most common reason for the end of the deferral is the cessation of personal use. Therefore, if you move out before the ten years have passed, the remaining tax liability becomes immediately due. The same applies if you sell or gift the property. The immediate due date can catch you off guard and reinstates the financial pressure you wanted to avoid. It is therefore important to immediately report any change in use to the tax office. Plan long-term and bear in mind that the tax is not waived but merely deferred. A thoughtful financial plan, possibly supported by a digital inheritance manager, will help you manage the tax burden at the end of the deferral period. This way, the deferral remains an effective tool and does not become a trap.
Conclusion: Using deferral as a strategic tool
The deferral of inheritance tax for a self-occupied property is a valuable right for heirs. It prevents a forced sale and gives you up to ten years to settle the tax debt. The key to success lies in a well-prepared application that transparently demonstrates to the tax office that payment is impossible without disposing of the property. The decisive factor is often a precise and independent property appraisal. With a professional valuation from Auctoa or an initial analysis through our ImmoGPT chat, you create a solid foundation for your application. Use this legal opportunity strategically to secure your family inheritance. Careful planning is the best way to overcome the challenges of inheritance tax.
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Additional useful links
The official platform of the Federal Ministry of Justice, Gesetze im Internet, provides the exact wording of § 28 of the 1974 Inheritance Tax Act, which regulates the deferral of tax payments.
The Finance Administration of Baden-Württemberg provides detailed information on the conditions and process for the deferral of inheritance and gift tax.
The Federal Ministry of Finance offers a comprehensive explanation on its page about the Inheritance Tax Act, specifically § 28 ErbStG, which deals with deferral.
Haufe, a leading provider of professional information, highlights the importance of quick decisions regarding inheritance tax, particularly in the context of the family home.
The law firm Rose & Partner explains the conditions under which a family home can be inherited tax-free by spouses and children.
Steuertipps.de provides information on the changes in property valuation for inheritance tax, which come into effect from 2023.
The Federal Statistical Office offers an overview of its publications and data on inheritance tax in Germany.
A recent press release from the Federal Statistical Office provides the latest figures and facts on the topic of inheritance tax.
The Federal Ministry of Finance provides comprehensive general information on inheritance and gift tax.
Wikipedia offers a detailed overview of inheritance tax in Germany, its history, and current regulations.
FAQ
How can I prove that I can only pay the tax by selling real estate?
You must submit a comprehensive statement of assets to the tax office, which includes all account balances, portfolios, other real estate assets, and other valuable items. A written explanation as to why these funds cannot be used for tax payment is also required.
What is the difference between the deferral according to § 28 ErbStG and § 222 AO?
§ 28 ErbStG is a specific regulation for inherited or gifted residential property that grants a legal entitlement to an interest-free deferral for up to ten years, provided the conditions are met. § 222 AO is the general deferral rule of the Fiscal Code, which requires a significant hardship for the taxpayer and is a discretionary decision by the tax office, usually accompanied by interest.
Can I also apply for a deferral for a rented property?
Yes, § 28 (3) of the Inheritance Tax Act (ErbStG) also allows for a deferral for residential rental properties. The conditions are similar: you must prove that the tax can only be paid by selling the property.
What if my deferral request is rejected?
If your application is rejected, you must pay the assessed inheritance tax within the specified deadline. You can appeal against the rejection notice. In this case, consulting a tax advisor is strongly recommended.
What role does property value play in the application?
The property value is central. It determines the amount of inheritance tax for which a deferment is requested. A realistic market value recognized by the tax office, often supported by an expert opinion, is the basis for the entire calculation and argumentation.
Does the extended deferral rule from 2025 also apply to older inheritance cases?
No, the amendment to the Annual Tax Act 2024, which extends deferral to all types of owner-occupied properties, applies to acquisitions where the tax arises after 31 December 2024.
