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Do you own a property or are you planning a purchase? Many owners pay thousands of euros too much in taxes each year because they are unaware of the legal saving potentials. This article shows you how to reduce your financial burden through strategic tax optimisation and unlock the full potential of your property.
With access to Google, BORIS, and Deep Research.
Profits from the sale of rented properties are tax-free after a holding period of 10 years, which can mean savings of up to 45%.
As a landlord, you can deduct almost all expenses (interest, repairs, management) as business expenses, thus significantly reducing your tax burden on rental income.
Lifetime gifts allow for the repeated use of tax allowances (e.g. €400,000 per child) every 10 years and are often more advantageous than inheritance from a tax perspective.
Are you wondering if you're maximising the potential of your property? The right strategy for tax optimisation is often the key lever to significantly increase your net return. Whether buying, selling, renting, or in the case of inheritance – the German tax system offers numerous, often unused opportunities to legally reduce your tax burden. From correctly deducting advertising costs that protect your rental income to tax-free sales after certain deadlines: forward planning can make a difference of tens of thousands of euros. We guide you through the key levers and show you how to avoid pitfalls, systematically protect and enhance your property assets.
Utilise the speculation period: Gains from the sale of a rented property are completely tax-free after a holding period of 10 years.
Maximise advertising costs: As a landlord, you can deduct interest, repairs, and management costs annually, which directly reduces your taxable income.
Apply depreciation (AfA): Depreciate the acquisition or production costs of the building annually by up to 3%.
Utilise inheritance tax allowances: Carefully planned gifts during your lifetime can reactivate allowances of up to €500,000 per child every 10 years.
Optimise additional purchase costs: Itemise movable inventory separately in the purchase contract to reduce the property transfer tax by thousands of euros.
These fundamental tactics form the foundation of every successful property strategy.
One of the greatest financial advantages for property owners is the so-called speculation period. If you sell a rented property within ten years of purchase, the entire profit is subject to your personal income tax rate, which can be up to 45%. However, if you wait just one day longer than the 10-year period, the entire sales profit is 100% tax-free. With a value increase of €200,000, this means a tax saving of up to €90,000. For owner-occupied properties, the regulation is even more advantageous: The period is reduced to just three years if you have lived in the property in the year of sale and the two preceding years. A precise examination of the deadlines is thus essential, as the article on selling an inherited house and speculation period shows in detail. Therefore, strategic planning of the sales timing is the simplest form of tax optimization.
As a landlord, you must pay tax on your rental income, but in return, you can deduct almost all incurred costs as advertising expenses. This significantly reduces your tax base. The most important deductible items include:
Loan interest: The interest on the property loan is fully deductible.
Maintenance expenses: Costs for repairs and maintenance can be claimed immediately.
Management costs: Fees for property management, account management, or a tax advisor are deductible.
Ongoing ancillary costs: Property tax, insurance, and other costs not transferable to tenants also reduce your tax.
Additionally, you benefit from depreciation for wear and tear (AfA). Depending on the year of construction, you can write off 2%, 2.5%, or even 3% of building costs annually for new builds since 2023. A professional appraisal of the remaining useful life can potentially increase the depreciation rate, further boosting your annual tax savings.
Before actually acquiring ownership, you can pave the way for a lower tax burden. The property transfer tax, which amounts to between 3.5% and 6.5% of the purchase price depending on the federal state, offers optimization potential. If you buy an existing property, have movable extras like the fitted kitchen, awnings, or a sauna itemised with a realistic value separately in the notarised contract. No property transfer tax is charged on this part of the purchase price. With a value of €15,000 for the kitchen, you save €975 in a federal state with a 6.5% tax rate. Even greater savings are possible with new build projects: First acquire the land and then commission a construction company separately. In this case, the property transfer tax is only levied on the pure land price, not on the often much higher construction costs. This way, you can fully utilise the tax advantages of land acquisition.
If you want to pass on your property assets to the next generation, you shouldn't wait until inheritance. A lifetime gift is one of the most effective tools for tax optimization. The personal allowances are high and can be strategically used:
Spouses and registered civil partners: €500,000
Children and stepchildren: €400,000
Grandchildren: €200,000
Siblings, nieces, and nephews: €20,000
The crucial advantage of the gift is that these allowances can be fully used again every 10 years. A couple with two children can transfer property assets worth €1.6 million completely tax-free to their children over 20 years. A usufruct right also protects the parents, as they can continue to live in the property or keep the rental income for themselves. An inheritance tax calculator helps with the initial calculation. This makes succession plannable and minimizes the tax burden.
Where there is a lot of potential for savings, risks also lurk. A critical point is the so-called three-object limit. If, as a private individual, you sell more than three properties within five years, the tax office quickly classifies you as a commercial property dealer. The consequence: the profit from all sales becomes subject to trade tax and the advantageous speculation period no longer applies. Even an inherited apartment building that is divided into individual flats and sold can exceed this limit. Therefore, a precise analysis of your buying and selling intentions is crucial to avoid inadvertently making tax-related mistakes. In case of doubt, consulting our experts or using our ImmoGPT chat can provide initial clarity before you take action.
Property tax optimisation is not a one-time act, but a continuous process. From adhering to the 10-year speculation period to fully deducting all advertising expenses and proactively planning gifts—each step has direct financial implications. Even minor adjustments, such as separately listing a kitchen in the purchase contract, can save over €1,000. A professional, data-driven valuation by Auctoa provides you not only with the fair market value but also a solid foundation for your tax decisions. Act proactively to protect your assets and sustainably increase your returns.
The Federal Ministry of Finance provides an application for the apportionment of purchase prices for properties, which is helpful for tax assessments.
On gesetze-im-internet.de, you can find the full text of Section 7 of the Income Tax Act (EStG), which governs depreciation (AfA).
The link to gesetze-im-internet.de takes you directly to Section 23 of the Income Tax Act (EStG), which contains the regulations for private sales transactions.
What is the speculation tax on real estate?
The speculation tax is not a separate type of tax. Profit from a private sale within the speculation period is taxed at your personal income tax rate, which can be up to 45%, plus a solidarity surcharge and, where applicable, church tax.
Can I deduct the property acquisition tax from my taxes?
Only if you rent out the property or use it for commercial purposes. The property acquisition tax is then considered as acquisition costs and is depreciated together with the building value over the useful life (e.g. 50 years). It is not deductible for personal use.
What is the difference between maintenance expenses and production costs?
Maintenance expenses (e.g. repairing a broken heater) can be fully deducted as business expenses in the same year. Production costs (e.g. adding a balcony, fundamental modernisation) increase the value of the property and must be depreciated over the remaining useful life.
How can I optimise the new property tax from 2025?
Direct optimisation is hardly possible, as the calculation is based on the new property tax values and the levy rates set by the municipalities. However, a correct and timely submission of the property tax declaration is crucial to avoid incorrect, potentially excessive assessments. Use our property tax calculator for preparation.
What tax benefits do I have with an energy-efficient renovation?
For owner-occupied properties that are more than 10 years old, you can deduct 20% of renovation costs (up to €40,000) from your tax liability over three years. The distribution is: 7% in the first and second years, 6% in the third year.
Do I need to tax rental income from relatives?
Yes, rental income must always be taxed. To have the rental agreement and associated business expenses recognised by the tax office, the rent should be at least 66% of the local comparable rent. For rent between 50% and 66%, a detailed examination of the profit-making intention is necessary.
