Did you know that the additional costs when buying property often exceed 15% of the purchase price? Many of these expenses can be avoided if you are aware of the most common tax law mistakes when purchasing real estate. This article shows you how to save thousands of euros through careful planning.
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The topic briefly and concisely
The property transfer tax varies between 3.5% and 6.5% depending on the federal state and is a significant cost factor.
The sale of a property within 10 years of purchase can trigger high speculative taxes on the profit.
Notary and land registry costs are a fixed yet transparent cost component at around 2% of the purchase price.
Buying real estate is one of the biggest financial decisions of your life. However, while the focus is often on the actual purchase price, there are significant costs hidden in the fine print. The property transfer tax alone can be up to 6.5%, depending on the federal state, which already amounts to €26,000 on a purchase price of €400,000. Adding notary and land registry fees can quickly push the additional costs up to over €50,000. Incorrect contract structuring or ignorance of tax deadlines can further increase this amount. However, with the right knowledge, these pitfalls can be avoided, significantly reducing the financial burden. We show you the key levers.
The land transfer tax trap: Targeted reduction of up to 6.5% of the purchase price
The property transfer tax is the largest portion of the additional purchase costs and varies significantly depending on the federal state. While in Bavaria only 3.5% of the purchase price is due, in Brandenburg, North Rhine-Westphalia, or Schleswig-Holstein, it is 6.5%. For a purchase price of €500,000, the difference is already €15,000. A common mistake is to use the entire purchase price as the assessment basis, even though not all components are taxable.
Movable items, such as a fitted kitchen or a sauna, can be deducted from the purchase price. Specify these items separately in the notary contract with a realistic value to legally reduce the tax burden. A clear separation can lower the property transfer tax by €500 to €2,000. Professional tax optimisation starts right here. However, this strategy requires an accurate and market-compliant evaluation to be recognised by the tax office.
The 10-Year Rule: How to Completely Avoid Capital Gains Tax
Are you planning to use the property as an investment? Then the 10-year speculation period is crucial for you. If you sell a rented property before this period expires, you will have to pay capital gains tax at your personal income tax rate, which can be up to 45%. The gain is calculated from the difference between the sale price and the original purchase cost.
There is an important exception for personal use: If you have lived in the property yourself during the year of sale and the two preceding years, the speculation tax is completely waived. For heirs, it's important to know: The 10-year period does not start with the inheritance, but from the original purchase date by the deceased. A precise understanding of the legal framework is essential here to avoid costly surprises.
Additional costs in focus: Understanding notary and land registry fees of up to 2%
A property purchase in Germany is invalid without notarisation. The costs for this are legally fixed and non-negotiable. You should expect around 1.5% of the purchase price for the notary and an additional 0.5% for the entries in the land register. For a purchase price of €400,000, this amounts to approximately €8,000 in fixed fees.
Although these costs are non-negotiable, it is important to understand their composition. The notary ensures the legally secure execution, obtains approvals, and initiates the transfer of ownership. A transparent breakdown of the activities in the fee notice provides you with the assurance that you are only paying for the services actually provided. Familiarise yourself with the role of the notary to understand the process.
Contract drafting error: allocation of purchase price and hidden gifts
A well-intentioned but risky 'trick' is the artificial division of the purchase price to save taxes. If the value of the land is set unrealistically low and that for tax-free inventory too high, the tax office may make its own assessment. This not only leads to additional payments but also carries the risk of proceedings for tax evasion.
Particular caution is required with family transfers. A sale to children at a nominal price, which is well below the market value, is classified by the tax office as a mixed gift. If the value of the gift exceeds the personal allowance of €400,000 per child every 10 years, gift tax becomes due. A data-driven valuation, such as that provided by Auctoa, creates a solid and recognised basis for your purchase contracts.
Conclusion: Proactive planning and data-driven evaluation are key
Avoiding tax-related mistakes when purchasing property is not a gamble but the result of careful planning. The greatest savings potential lies in correctly handling the property acquisition tax and adhering to the speculation period. Even small adjustments in the purchase contract can reduce your additional costs by thousands of euros. The decisive factor is a realistic and comprehensible property valuation.
Are you unsure how to accurately assess the value of your property or inventory? The AI-powered ImmoGPT chat from Auctoa provides you with an initial assessment in just 2 minutes. For a detailed analysis and legally secure documentation, our bank-independent valuation offers the reliable foundation you need for negotiations with buyers and the tax authorities. Make your decision based on data, not just a gut feeling.
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Additional useful links
The Federal Ministry of Finance provides comprehensive information on property tax and real estate transfer tax.
Introductory tax information on property tax and real estate transfer tax can be found on the page of the Federal Ministry of Finance.
A BMF letter on the application of § 6a of the Real Estate Transfer Tax Act (GrEStG) is available on the website of the Federal Ministry of Finance.
The Federal Ministry of Finance provides the legal text for the amendment of the Real Estate Transfer Tax Act.
Wikipedia offers a detailed article on real estate transfer tax in Germany.
The Consumer Advice Centre provides information on various models of property financing and important aspects to consider.
Information on calculating affordable property financing is provided by the Consumer Advice Centre.
Frequently asked questions and answers about property financing can be found on the website of the Consumer Advice Centre.
The Federal Ministry of Finance offers a comprehensive overview of the different types of taxes.
A detailed analysis of the property tax reform can be found in the monthly reports of the Federal Ministry of Finance.
FAQ
What taxes apply when purchasing a property?
When purchasing, the primary costs are the one-time real estate transfer tax (3.5% - 6.5% of the purchase price) as well as notary and land registry fees. As an owner, you need to pay the annual property tax regularly. If you sell the property within 10 years, you may also incur capital gains tax on the profit.
Can I deduct the additional purchase costs from my taxes?
If you rent out the property (as an investment), you can deduct the incidental purchase costs, including the real estate transfer tax and notary fees, as part of the acquisition costs over the useful life of the building (depreciation). This is not possible for personal use.
What is the difference between property tax and land transfer tax?
The property transfer tax is a one-time transaction tax that is due when purchasing a property. In contrast, property tax is an annual municipal tax that every owner must pay for owning land.
Does the 10-year speculative period also apply to undeveloped land?
Yes, the speculation period of ten years applies equally to developed and undeveloped land. The exception for personal use generally does not apply to undeveloped land, so a sale within 10 years is almost always taxable.
Is a professional property valuation worth it for tax minimisation?
Yes, an independent, data-driven evaluation is an important foundation. It helps to set a realistic purchase price for inventory to save on property transfer tax and serves as proof of market value for the tax office to avoid issues with gifts or family sales.
Who pays the notary fees when buying property?
Typically, the buyer bears the majority of the notary and land registry costs, as the notarization and registration are in their interest. However, by law, both parties are liable for the payment of the costs.
