Do you want to sell your house to your son without making costly mistakes? A real estate transaction within the family is emotional and complex, but it offers significant financial advantages when properly structured. This guide shows you how to make the process fair, save on taxes, and secure your own future.
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The topic briefly and concisely
When selling a house to your son, the property transfer tax is waived, meaning a saving of 3.5% to 6.5% of the purchase price.
A sale below market value is considered a mixed gift; the gift tax allowance for children is €400,000 per parent.
A usufruct right grants the parents a lifelong right to live in and use the property, reducing the taxable value of the property.
The decision to sell your own house to your son is more than just a financial transaction; it is an important step in estate planning. Every year, assets worth around 400 billion euros are passed on to the next generation in Germany, a large part of which is in the form of real estate. Selling during your lifetime can often be wiser than a gift or inheritance. It not only provides financial liquidity for your retirement but also creates clear conditions and prevents potential inheritance disputes. With the right strategy, you not only secure yourself but also enable your son to have a favourable start in his own home. This article guides you through the key tax and legal aspects.
Sale instead of gift: Why a deal is often the better solution
Are you wondering if a gift might be simpler? A sale offers decisive advantages over a pure gift, which go beyond just cash flow. The proceeds from the sale secure your financial independence in retirement and cover unforeseen expenses, such as for age-appropriate housing or care costs averaging 2,500 euros per month. A notarised sale is also legally unassailable and prevents future conflicts if there are other siblings. Unlike a gift, which can potentially trigger compulsory share supplementation claims, a fair sale creates clear facts. This way, the family's assets are preserved and peace is maintained. Setting a fair purchase price is the first and most important step.
Determining the Fair Purchase Price: The Central Role of Market Value
The right purchase price is the foundation for a successful sale of the house to the son. It must be fair for both parties and withstand scrutiny by the tax office. If the agreed price is significantly - often starting from 20-25% - below the market value, the authority considers the difference as a mixed gift. This can trigger unexpectedly high gift taxes. An independent market value appraisal is therefore indispensable to create a solid, recognised basis. It protects against additional claims and serves as a foundation for all further steps. A data-based valuation of your property provides you with the necessary security. With a clear value in hand, tax aspects can be optimised in a targeted manner.
Tax Optimization: A Trio You Need to Know
Grunderwerbsteuer: Der erste große Vorteil
One of the biggest financial advantages of selling a house to your son is the complete exemption from property transfer tax. Since this involves a sale to a first-degree relative, this tax, which can range from 3.5% to 6.5% of the purchase price depending on the federal state, does not apply. With a property value of 400,000 euros, you save between 14,000 and 26,000 euros just through this exemption. This saving makes the purchase much more attractive for your son and eases the financing.
Schenkungssteuer: Der Freibetrag als Gestaltungsinstrument
If you sell the house below the determined market value, gift tax comes into play. Each child is entitled to a personal tax allowance of 400,000 euros per parent every 10 years. If the difference between market value and purchase price falls within this range, no tax is payable. A couple can therefore gift their son a property worth 800,000 euros without incurring taxes. A thoughtful planning of gift tax is crucial here.
Spekulationssteuer: Die 10-Jahres-Regel als Schutzschild
The speculation tax on the profit from the sale is not applicable if two conditions are met. Either you have owned the property for more than 10 years, or you have lived in it during the sale year and in the two previous years. As it is usually a long-term family home, this tax is rarely an issue in practice. This gives you the freedom to use the proceeds from the sale for your retirement without deductions and to consider further protection models.
Parental Security: How to Safeguard Your Future in Your Own Home
A sale to the son does not mean you have to move out. Contractual agreements can secure your living situation for life. The two most important instruments are the right of residence and usufruct. While the right of residence only allows you to live in the property, usufruct goes further. Usufruct offers maximum flexibility and financial security for you as the seller. The value of usufruct is deducted from the market value of the property, legally reducing the official purchase price and any potential gift tax liability. An inheritance settlement report can provide clarity here.
The benefits of usufruct include:
Lifelong right of residence: You can stay rent-free in your familiar surroundings.
Right to rent out: Should you move into a care home, you can rent out the house and use the income to cover costs that often exceed 3,000 euros per month.
Tax reduction: The capital value of the usufruct significantly reduces the value of the gift.
Insolvency protection: The right remains even if the son faces financial difficulties.
This security is a key component for a worry-free transition into the new phase of life.
The legal process: Sell successfully in 5 steps
A house sale within the family follows a clear, legally specified process to ensure security for both parties. Following these steps is crucial for a smooth transaction. The costs for the notary and land registry entry typically amount to about 1.5% to 2.0% of the notarised purchase price and are usually borne by the buyer.
The process can be divided into five main phases:
Obtain property valuation: Have the market value determined by a neutral expert like Auctoa, to ensure a fair and legally secure basis.
Clarify financing by the son: Your son should speak with his bank at an early stage to secure the financing commitment for the purchase price. A solid financial plan is the foundation for this.
Schedule a notary appointment: A notary drafts the sales contract, informs both parties of the legal implications, and certifies the contract. Clarify all questions concerning the notary here.
Purchase price payment and handover: After notarisation and the registration of a priority notice in the land register, the purchase price becomes due.
Entry in the land register: Once the tax office issues the clearance certificate (regarding property transfer tax), the notary arranges the final transfer of ownership in the land register.
With this structured approach, you ensure that the sales process is transparent and understandable for all parties involved.
Conclusion: A strategic step for two generations
The sale of a house to one's own child is much more than an alternative to inheritance. It is an active planning tool that, when correctly executed, provides financial security for the parents and paves the way for the child to own a home. By utilising tax advantages such as the elimination of property transfer tax and the clever application of gift tax allowances, the transaction can be optimised for both parties. A professional appraisal and the security provided by a usufruct right are the key pillars for a fair and legally secure deal. A well-planned sale not only safeguards assets but also strengthens family bonds for the future.
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Additional useful links
Bundesfinanzministerium offers comprehensive information on inheritance and gift tax in Germany.
Federal Statistical Office (Destatis) provides relevant statistical data that can be important for inheritance or real estate matters.
Stiftung Warentest examines how tax authorities determine the market value of properties.
KPMG gives tax advice on usufruct in Germany.
Sparkasse provides information about usufruct in the context of property sales.
Federal Statistical Office (Destatis) provides data on construction prices and real estate price indices.
FAQ
How can I legally reduce the purchase price without incurring high taxes?
The most effective method is registering a usufruct or right of residence in the land register. The value of this right is deducted from the market value of the property, which legally reduces the taxable portion of the gift. An expert can calculate the exact value of the usufruct.
What happens if I need to go into a care home after selling to my son?
If you have secured a usufruct right, you can rent out the property and use the rental income to cover care costs. Without such an arrangement and if your own funds are insufficient, the social welfare office may, under certain circumstances, reclaim an earlier gift (within 10 years).
Does selling to the son incur capital gains tax?
As a rule, no. Capital gains tax is not applicable if you have owned the property for more than ten years or have lived in it yourself in the year of sale and the two preceding years. In the case of family properties, one of these two conditions is almost always met.
Who pays the notary fees when selling within the family?
Legally, this is not stipulated, but in practice, the buyer, in this case, the son, typically covers the notary and land registry costs. This should be clearly defined in the purchase contract.
Do I need an energy certificate to sell to my son?
Yes, even for a sale within the family, a valid energy certificate is legally required. It must be presented to the son at the latest during the viewing and handed over at the notarization. The costs for this range between 50 and 500 euros, depending on the type of certificate.
Can my son deduct the purchase from his taxes?
If the son rents out the property after purchasing it, he can claim the acquisition costs (purchase price and ancillary costs) as well as future renovation costs as tax-deductible expenses and depreciate them over the years. This is not possible for personal use.
