Gifting a property during your lifetime is a generous gesture that often involves high tax demands. A blanket assessment by the tax office can cost you thousands of euros. Discover how an accurate property valuation when making a gift not only secures the true value but also significantly reduces your tax burden.
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The topic briefly and concisely
A professional property valuation can often contradict the frequently inflated blanket assessment of the tax office and reduce the tax burden by 20-30%.
Personal allowances (e.g. €400,000 for children) can be used anew every 10 years, allowing for staggered, tax-free transfers.
Rights such as usufruct significantly reduce the taxable value of the property while ensuring the donor lifetime income or a right of residence.
Wondering how to pass on your real estate assets to the next generation with optimal tax efficiency? Lifetime gifting is a popular method to prevent inheritance disputes and transfer wealth deliberately. However, without an accurate property valuation, this step can quickly turn into a tax trap. The tax office often uses standardised methods that overestimate the value of your property, unnecessarily increasing the gift tax. This article shows you how to demonstrate the actual market value with a professional valuation, make optimal use of allowances, and reduce your financial burden by up to 30%.
Basics of Gift Tax: Understanding Allowances and Cycles
For every gift, the tax office checks whether gift tax is applicable. This only occurs if the property's value exceeds the personal allowances. For spouses and partners, the allowance is 500,000 euros. Children can receive properties worth up to 400,000 euros tax-free, while grandchildren have an allowance of 200,000 euros. The key advantage of a lifetime gift is that these allowances can be fully utilized every 10 years. Staggered transfers of large estates over 20 or 30 years can thus reduce the tax burden to zero. A thorough understanding of the applicable gift tax is the first step towards optimization. These tax conditions clearly illustrate why an accurate property valuation is so crucial.
The Assessment by the Tax Office: A Risk of Standardised Procedures
The tax office determines the value of a property for inheritance tax purposes through standardised mass procedures, which are defined in the Valuation Law (BewG). These blanket calculations often take place from the desk and ignore factors that reduce value, such as a backlog in renovations, poor energy efficiency, or a less favourable micro-location. In practice, this often leads to an overvaluation of 15% to 25% compared to the actual market value. This discrepancy can increase your inheritance tax by several thousand euros. Depending on the type of property, the authority uses one of three methods: the comparative value method, the income value method, or the intrinsic value method. If you want to accurately present the market value for the tax office, you must actively challenge this standardised perspective. The high error rate of the official valuation often makes a counter-evaluation essential.
The market value appraisal: Your tool for reducing the tax burden
You do not have to accept an excessive valuation by the tax office. According to § 198 BewG, you have the right to demonstrate a lower market value through an expert report. Such a report is recognised by tax offices if it is prepared by a qualified, certified expert and meets formal criteria. Unlike the authority's general estimate, a detailed report takes into account all the individual characteristics of your property. Such a report can reduce the tax assessment basis by an average of 20%.
A recognised report must analyse the following points in detail:
The exact micro-location, including infrastructure and neighbourhood.
The structural condition, including any defects and damage.
The energy quality and conducted modernisations.
Legal circumstances such as registered encumbrances in the land register.
The current market situation for comparable properties.
A professional independent property valuation is thus the most effective method to ensure fair taxation. In addition to this direct evidence, there are further strategic approaches to reduce the taxable value.
Strategic Depreciation through Usufruct and Right of Residence
An extremely effective method of reducing gift tax is the registration of a usufruct or right of residence. The donor transfers ownership, but retains the right to live in the property for life or receive the rental income. The value of this right, known as the capital value, is deducted from the property value and thus reduces the tax base. The calculation of the capital value is based on the donor's statistical life expectancy and the annual value of the use (saved rent or rental income). For a 65-year-old donor, the usufruct can reduce the taxable value of a property by over 30%. An expert opinion can often set a higher, more realistic value than the tax office's standard calculations. This means that a property worth 550,000 euros can, with usufruct, fall below the allowance of 400,000 euros for a child, making the gift completely tax-free. Find out how you can arrange the inheritance tax with usufruct. This strategic planning is a key component based on precise valuation.
The Legal Framework: The Valuation Methods According to BewG
The Valuation Act (BewG) is the legal basis for the tax valuation of real estate in Germany. It defines three official procedures in paragraphs 182 onwards, which are applied by the tax office. Since an amendment in 2023, these procedures tend to lead to higher values than before. Therefore, an accurate professional valuation has become all the more important.
An overview of the three procedures:
Comparative Value Method (§ 183 BewG): This is the preferred method for owner-occupied properties such as single-family homes and condominiums. It is based on the actual purchase prices of comparable properties in the region.
Income Value Method (§ 184 BewG): Applied to rented properties, the value is calculated from the expected future rental income, operating costs, and land value.
Cost Value Method (§ 189 BewG): This procedure is used when no comparative or income data is available. It sums up the land value and the construction costs of the building, minus age-related depreciation.
Knowledge of these procedures helps you understand the tax office's estimate and take targeted action against it.
Conclusion: Proactive assessment as the key to tax optimisation
The property valuation for a lifetime gift is more than just a formality; it is a crucial strategic tool. Do not rely on the often overestimated appraisals by the tax office, which can cost you real money. A proactive, data-driven assessment by experts ensures the fair value of your property and fully utilises legal tax-saving opportunities. Whether through a counter-expertise or the skilful use of usufruct – an accurate numerical basis is your strongest negotiation asset. With an impartial valuation from Auctoa or an initial analysis via our ImmoGPT chat, you establish facts. Protect your assets with precise data, not sweeping estimates.
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Additional useful links
Bundesfinanzministerium provides comprehensive information on inheritance and gift tax.
Statistisches Bundesamt (Destatis) offers a detailed publication on inheritance and gift tax.
Wirtschaftsdienst analyses in an article the development of revenue from inheritance and gift tax.
Wikipedia provides an overview of the Inheritance Tax and Gift Tax Act.
Wikipedia explains the concept of the market value of real estate.
BORIS is the official information system for land value information.
Deubner Steuern offers an article on the tax assessment of real estate and the relevance of the purchase price.
FAQ
What is the difference between the market value and the fiscal value?
The market value (or market price) is the price that could realistically be achieved under normal market conditions. The fiscal value (common value) is determined by the tax office according to standardized legal guidelines and can considerably deviate from the actual market value, often upwards.
Is gift tax still applicable in the case of a donation with usufruct?
That depends on the value. The value of the usufruct is deducted from the property's value. If the remaining value is below the personal allowance of the recipient, no gift tax is due. Otherwise, only the excess amount will be taxed.
Does a gift always have to be notarised?
Yes, gifting a property in Germany always requires a notarised deed of gift. The notary also arranges the necessary change in the land register.
Does a recent renovation increase the value for gift tax purposes?
Yes, value-enhancing measures such as a comprehensive renovation or modernisation increase the market value of the property. This is taken into account both in a professional appraisal and potentially in the tax office's assessment, and may increase the gift tax.
What documents do I need for a property valuation when gifting?
For an accurate assessment, a current land register extract, the cadastral map, building plans (floor plans, sectional drawings), a living space calculation, the energy certificate, and for rented properties, the rental agreements as well as a breakdown of the operating costs are usually required.
Can I also gift a property in parts?
Yes, you can also gift co-ownership shares of a property. This is a common method to make optimal use of the 10-year period for allowances, by transferring, for example, a share worth 400,000 euros to a child every 10 years.
