Did you know that thousands of euros in tax savings are often hidden in the fine print of a sales contract? Many buyers pay more property transfer tax than necessary because they overlook legal structuring options. This article shows you how to avoid the most common mistakes and significantly reduce your financial burden through targeted strategies.
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The topic briefly and concisely
Specify movable items such as fitted kitchens (value up to €15,000) separately in the purchase contract to reduce the real estate transfer tax.
Landlords can depreciate 3% of the building costs annually for new constructions (from 2023); an accurate valuation maximizes this benefit.
When building a new home, enter into separate contracts for the land and construction to pay land transfer tax only on the land value and save up to €19,500.
Purchasing a property is one of the largest investments in life. However, while the focus is often on the purchase price and financing, the tax aspects are frequently neglected. This is a strategic mistake, as property transfer tax alone can account for up to 6.5% of the purchase price, depending on the federal state. Yet, there are legal ways to optimise this and other tax burdens. From the correct allocation of the purchase price to the use of depreciations – the right decisions can drastically reduce your additional costs. We guide you through the most important levers for tax benefits when purchasing property and show how a data-driven assessment creates the foundation for your savings.
In Brief: Your Savings Potential
The purchase of a property is a complex process with significant financial implications. The good news: you have several legal ways to reduce your tax burden. This checklist summarises the key strategies, which we will explain in detail below.
Reduce property transfer tax: By separately listing movable goods in the purchase contract, you can reduce the assessment basis by 5-15%.
Separate contracts for new builds: First purchase the land and later enter into a separate construction contract to pay tax only on the land value.
Depreciation for landlords (AfA): Use linear, declining balance or special depreciation (AfA) to claim up to 5% of building costs annually for tax purposes.
Internal family transfer: When selling or gifting to direct relatives (e.g., children), the property transfer tax is completely waived.
Accurate valuation: A precise valuation by experts is the basis for correctly determining the deductible building proportion.
Each of these measures requires careful planning and documentation to be recognised by the tax office.
Lever 1: Actively Shaping the Real Estate Transfer Tax
Stamp duty, ranging from 3.5% to 6.5% of the purchase price, is often the largest block of ancillary costs. Many buyers accept the full amount without knowing that the assessment basis is negotiable. The law taxes only the land and its fixed components. Anything that is movable can be excluded.
This includes, for example:
A fitted kitchen (often valued between €5,000 and €15,000)
Awnings and saunas (valued between €1,000 and €8,000)
Garden houses without permanent foundations
Furniture or other taken-over inventory items
List these items at realistic prices separately in the notary contract. For a purchase price of €400,000 and a value for movable goods of €20,000, you save €1,300 in a state with a 6.5% tax rate. Accurate allocation is crucial, as inflated values may prompt inquiries from the tax office. To be on the safe side, a neutral assessment can help, as offered free of charge by our ImmoGPT-Chat.
Lever 2: Optimize Depreciation for Landlords
If you rent out your property, you can claim the depreciation of the building for tax purposes. This is done through depreciation for wear and tear (AfA). The key is: only the building depreciates, not the land. Therefore, the purchase price must be divided into a building and a land portion.
For residential buildings completed after 1 January 2023, a linear depreciation of 3% per year over 33 years applies. For older buildings (built after 1924), it is 2% over 50 years. Accurately dividing the purchase price can be financially valuable. A higher proportion of the building directly leads to a higher annual tax savings. The tax authorities often accept a standard division, but a detailed property valuation can identify a higher, realistic proportion of the building and increase your return. This is one of the most important tax advantages when acquiring property for investors.
Special Case New Building: Declining Depreciation and Other Advantages
For investors in newly created residential space, the legislator has provided additional incentives. For new rental housing with construction starting between October 2023 and September 2029, there is a declining balance depreciation (AfA). In the first year, you can write off 5% of the investment costs, and 5% of the remaining balance in each of the following years.
Additionally, there is a special depreciation under § 7b EStG for new rental apartments. Here, you can claim an additional 5% of the manufacturing costs for four years, in addition to the straight-line depreciation. In the first four years, up to 32% of the costs can thus be deducted. These regulations are intended to stimulate investment and are a powerful tool for managing your liquidity. They highlight the importance of good financial and tax planning before construction begins.
Avoiding tax pitfalls: The standard contract for new construction
A common and costly mistake in new builds is purchasing land and construction services from a single source. If you buy land from a developer who also builds the house, the tax office views this as a single transaction. Consequently, property transfer tax is due on the total price – that is, land plus construction costs.
This can be legally avoided. Arrange two separate contracts: one for the land purchase and a second, independent contract with a construction company. Ideally, there should be at least six months between the two contract signings. This way, you ensure that the property transfer tax is only applied to the land price itself. With a land value of €150,000 and construction costs of €300,000, you can save up to €19,500 in taxes, depending on the federal state. Inform yourself early about the risks of buying land to avoid such pitfalls.
Conclusion: Strategic planning is the key to saving taxes
The tax benefits of purchasing property are diverse, but they require proactive action. Whether it's about the correct allocation of the purchase price, using depreciation, or strategic contract structuring in new constructions – each decision has direct financial implications. A data-driven and neutral property valuation, like the one offered by Auctoa, is not a cost factor but an investment. It provides the necessary foundation to fully exploit all legal savings potentials and significantly reduce your ancillary purchase costs. Make use of your right to fair taxation.
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Additional useful links
Das Bundesfinanzministerium offers official information on property tax and real estate transfer tax.
Destatis provides press releases and statistical data.
Die Bundeszentrale für politische Bildung offers articles and information on the German tax system.
Das ifo Institut publishes research findings on property taxation.
Gesetze im Internet provides the full legal text of the Real Estate Transfer Tax Act.
Die Deutsche Bundesbank provides statistics and indicators on the residential property market.
Die Verbraucherzentrale offers consumer advice on property financing.
FAQ
What tax advantages do I have when purchasing property for personal use?
For personal use, the tax benefits are limited. You cannot directly deduct the purchase price or additional costs. The primary saving potential lies in reducing the property transfer tax by listing movable assets, such as the kitchen, separately in the purchase contract.
How is the deductible building portion separated from the land portion?
The allocation is generally carried out according to the guidelines of the Federal Ministry of Finance or through an expert appraisal. An appraisal can often demonstrate a higher, more realistic proportion of the building, which increases your depreciation basis and consequently your tax savings.
Is the declining depreciation always worthwhile?
The declining balance depreciation method leads to higher tax savings in the initial years, which improves liquidity. As the depreciation amount decreases annually, it makes sense to switch to straight-line depreciation later when it results in a higher amount. This is legally permitted.
What happens if the tax office does not accept my valuation of the fitted kitchen?
If the tax office considers the assessed value to be excessive, it will make its own estimate and subsequently demand the appropriate amount of real estate transfer tax. Therefore, it is important to set realistic, verifiable values (e.g., based on current market value or original invoices).
Can I deduct renovation costs from my taxes?
Yes, for rented properties, you can immediately deduct maintenance expenses as advertising costs. For major renovations (expenses similar to acquisition costs), the costs are depreciated over time through the depreciation for wear and tear (AfA). For owner-occupied properties, you can deduct labour costs for craftsmen services (up to €1,200 per year).
Does the tax exemption within the family also apply to siblings?
No, the exemption from real estate transfer tax only applies to relatives in direct line (parents, children, grandparents, grandchildren) as well as to spouses and registered civil partners. A sale between siblings regularly triggers real estate transfer tax.
