Inheriting a property is an emotional situation, but the tax authorities quickly demand a clear figure. The value of your inherited property set by the authorities for the tax return is often too high and can unnecessarily increase your financial burden. Understand how to determine the value correctly and protect yourself from excessive demands.
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The topic briefly and concisely
The tax office often overvalues inherited properties as it applies standardised procedures without an inspection.
Personal allowances ranging from €20,000 to €500,000 can significantly reduce or even completely avoid inheritance tax.
According to § 198 BewG, you can prove a lower property value with an expert appraisal and thus reduce your tax burden.
Faced with an inheritance, many find themselves unexpectedly up against a complex tax requirement: the determination of property value for the tax office. An inaccurate or overly high estimate can increase inheritance tax by tens of thousands of euros. This article explains the tax office’s valuation methods, highlights the crucial role of statutory allowances, and clarifies how you can demonstrate the real, often lower value with a professional market value appraisal according to § 198 BewG and significantly reduce your tax burden.
Essential Summary: 4 Steps for Accurate Evaluation
Understanding Tax Office Evaluation: The tax office uses standardised methods that often do not consider the individual condition of your property and may overestimate its value.
Check Allowances: Depending on the degree of kinship, you are entitled to allowances ranging from €20,000 to €500,000, which can reduce your tax burden to zero.
Provide Evidence of a Lower Value: The law (§ 198 BewG) explicitly allows you to demonstrate a lower and therefore fairer property value through an expert's report.
Meet Deadlines: You must inform the tax office of the inheritance within three months; the request for a tax return follows later.
These four points form the basis for a tax-optimised handling of your inheritance.
Valuation Basics: Why the Tax Office Uses the Market Value
If you have inherited a property, one of your first obligations is to notify the tax office within three months. The basis for calculating inheritance tax is the so-called market value (or common value) of the property as of the deceased's date of death. The Valuation Act (BewG) stipulates that the value that would be achievable in a sale under normal market conditions is taken into account. The issue here is that the tax office usually does not inspect the property in person. Instead, it relies on general data and standardised methods, which often lead to an overvaluation. Therefore, precise valuation is not a mere formality but a crucial lever to manage your financial burden. An initial step can be using an inheritance tax calculator to get an idea of the potential tax burden. Understanding the valuation methods in detail is the next logical step.
The Standard Procedures of the Tax Office: A Behind-the-Scenes Look
To estimate the market value, the tax office uses three legally defined, standardised valuation methods. The choice of method depends on the type of inherited property. For owner-occupied single and two-family houses or condominiums, the comparative value method is usually applied, which uses the selling prices of similar properties in the neighbourhood as a benchmark. For rented properties, the income capitalisation approach is used, which is based on the future expected rental income. The asset value method, a combination of land value and the building’s construction costs minus depreciation, is utilised when there are no comparable or income data available. These general methods often ignore value-reducing factors such as renovation backlogs, construction defects or an unfavourable micro-location. However, before you challenge the value, you should check if the tax is already eliminated due to personal allowances.
Make Use of Allowances: How to Legally Reduce Your Tax Burden to Zero
The Inheritance Tax and Gift Tax Act (ErbStG) grants heirs personal allowances based on their degree of kinship. These allowances remain completely tax-free, and only the value of the inheritance exceeding these is taxed. Understanding these allowances is essential to comprehend the actual financial impact of an inheritance. The gradation is as follows:
Spouses & registered partners: €500,000
Children & stepchildren: €400,000
Grandchildren: €200,000
Parents & grandparents (in case of inheritance): €100,000
All other heirs (e.g. siblings, nieces/nephews, friends): €20,000
If the value of your inherited property, as determined by the tax office, is below your personal allowance, no inheritance tax is due. But what happens if the value is only just above it? Then dealing with the assessment notice becomes obligatory.
Challenging the Decision: Your Right to Prove a Lower Value
If the tax office determines a value that is too high, you are not at the mercy of this judgment. Section 198 of the Valuation Act (BewG) grants you, as a taxpayer, the right to prove a lower fair value. This proof is best provided through a market value appraisal by a qualified expert. Such an appraisal holds up before the tax office because, unlike a blanket estimate, it is based on a detailed on-site analysis. It takes into account all the individual characteristics of your property, from the building's condition to its energy efficiency and any potential defects. Even a sale at a lower price within a year of the inheritance can serve as proof. The role of the appraisal is therefore central in establishing a fair basis for taxation. Engaging an expert is the most effective way to enforce this right.
The Expert Report: Precision Beats Generalization
A professional appraisal is more than just a second opinion – it is a detailed, evidence-based document. While the tax office works with average values, an appraiser examines dozens of value-relevant features directly at the property. These include, among others:
The exact condition of the building fabric and any refurbishment needs.
Energy deficiencies that could impact future costs.
Legal encumbrances in the land register, such as a right of residence or usufruct.
Peculiarities of the micro-location that are not reflected in the standard land values.
A qualified appraisal can reduce the tax assessment basis by 20-30%, potentially saving you several thousand euros. If you are unsure how to calculate the value of your inherited property, a KI-supported analysis like our ImmoGPT offers a quick initial assessment. However, for the final proof to the tax office, the expertise of a surveyor is indispensable.
wert-der-geerbten-immobilie-fur-die-steuererklaerung
Determining the value of an inherited property for tax purposes is a critical process that significantly affects your financial future. Do not blindly rely on the often overly high assessments from the tax office. Check your allowances, adhere to the deadlines, and exercise your right to demonstrate a lower, realistic market value. A professional appraisal is your strongest weapon against an excessive tax burden. A data-driven, objective evaluation protects your inheritance and provides financial clarity in a difficult time.
Additional useful links
Bundesfinanzministerium offers a comprehensive overview of inheritance and gift tax.
Bundesfinanzministerium provides information on the application of valuation rules for real estate in inheritance and gift tax.
Statistisches Bundesamt (Destatis) delivers data and information on construction prices and the property price index.
Stiftung Warentest explains how tax authorities determine the market value of properties.
Finanzamt Nordrhein-Westfalen provides forms for inheritance and gift tax.
Bundesministerium der Justiz offers access to § 12 of the Inheritance and Gift Tax Act (Valuation).
Bundesministerium der Justiz provides the Real Estate Valuation Ordinance (ImmoWertV) of 2022.
Bundeszentrale für politische Bildung (bpb) offers an encyclopedia entry on inheritance tax.
Deutsche Bundesbank presents its indicator system on the residential property market.
FAQ
What value do I need to declare in the tax return for an inherited property?
You need to indicate the fair market value of the property as of the deceased's date of death. If you're not aware of the value expected by the tax office, you can initially provide an estimate or directly commission a professional appraisal to establish a realistic and substantiated value.
How can I reduce the inheritance tax on a property?
The tax burden can be reduced by utilizing personal allowances, claiming relief for liabilities of the estate (e.g., funeral costs, appraisal costs), and especially by proving a lower market value through an expert appraisal.
What is the difference between an assessment by the tax office and an expert report?
The tax office uses flat-rate, standardized assessment procedures without inspection. An expert carries out a detailed on-site analysis, taking into account individual features such as structural defects, refurbishment backlogs, and the precise micro-location, which usually results in a more realistic and often lower value.
Does the tax office have to recognize my report?
An expert report prepared by a qualified, certified expert in accordance with legal regulations must be taken into account by the tax office as part of the evaluation of evidence. It is the legally prescribed method to demonstrate a lower value according to § 198 BewG.
Is inheritance tax always applied to an inherited and owner-occupied property?
No. Spouses and children can inherit a property inhabited by the deceased tax-free, provided they live in it themselves for at least ten years. For children, a living space limit of 200 square metres applies; anything above that is taxed proportionally.
What happens if I miss the 3-month deadline for reporting the inheritance?
Failure to comply with the notification obligation may be considered an administrative offence or even attempted tax evasion, even if it later turns out that no tax would have been due. It is therefore very important to meet this deadline.
