Real Estate Income Tax

Real Estate Income Tax

Anyone who sells a property and makes a profit must, in many cases, pay real estate income tax. When selling land, a house, or a condominium, a flat-rate real estate income tax of 30% is incurred, based on § 30 EStG.

If a person makes a profit from the sale of a property, they must pay real estate income tax on it

Learn when real estate income tax is incurred on property sales, what exemptions are possible, and what legal aspects to consider

Tax Liability for For-Value Property Sales

The tax applies to for-value sales of:

No tax applies to:

Rechtsanwalt Peter Harlander Peter Harlander
Harlander & Partner Rechtsanwälte „Die Immobilienertragsteuer wirkt oft technisch, ist aber rechtlich höchst sensibel. Wer sie unterschätzt, zahlt meist zu viel.“
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Tax Exemptions and Special Regulations

Primary Residence Exemption

If a property is a primary residence, its sale remains tax-exempt. Two options allow for tax exemption:

This exemption only applies if there was a for-value acquisition, for example, through purchase.
Conversely, a gratuitously transferred property, such as through inheritance or gift, generally does not meet this condition.

Builder’s Exemption

The sale of a self-constructed building is also tax-exempt, but only if:

The tax exemption applies exclusively to the building, but not to the land.
If the owner rents out the property in whole or in part within the last ten years, they benefit from the exemption only for the non-rented portion.

Attorney Sebastian Riedlmair Sebastian Riedlmair
Harlander & Partner Attorneys „Steuerlich entscheidend ist nicht der Verkauf, sondern die Details dahinter. Gerade bei Altliegenschaften lohnt sich die genaue Prüfung.“

Further Tax-Exempt Sales

Expropriations

No real estate income tax is incurred if the sale occurs to avoid official intervention, for example, in the context of expropriation or due to official pressure.

Certain Exchange Transactions

The following exchange transactions are tax-exempt:

Profit Determination for Property Sales

Anyone who sells a property realizes a so-called disposal gain, which results from the difference between the actual sales proceeds and the originally incurred acquisition costs.

New Properties

For properties purchased after March 31, 2002, the actual acquisition costs are deducted from the selling price. This also includes certain subsequent investments such as extensions or major renovations, if they have not already been considered for tax purposes.

Old Properties

For older properties acquired before March 31, 2002, the tax office applies flat-rate values. Typically, 86% of the proceeds are set as acquisition costs, meaning that only 14% must be taxed at the flat tax rate of 30%. This results in an effective tax burden of 4.2% on the selling price.

If a plot of land was rezoned from greenfield to building land after December 31, 1987, the tax office considers only 40% of the selling price as acquisition costs. This increases the taxable profit to 60%, leading to an effective tax burden of 18%.

Adjustment of Acquisition Costs

The tax office allows an adjustment of acquisition costs only for the so-called standard income determination, which primarily applies to new properties. In this process, it considers the actual acquisition costs.

Tax Rate

Since 2016, the tax office generally taxes profits from land sales at a fixed tax rate of 30%, whereby this tax does not increase the tax rate for other income.

Upon application, taxpayers can choose the lower regular income tax rate, known as the standard taxation option.

Collection and Remittance of Real Estate Income Tax

In many cases, sellers must pay real estate income tax on land or property sales. Lawyers or notaries calculate and remit this tax, especially if they also determine the real estate transfer tax for the buyer. In such cases, the law mandates tax processing through a party representative.

Two Methods for Tax Remittance

If the appointed lawyer or notary calculates the real estate transfer tax, they usually remit the real estate income tax simultaneously.

If the party representative does not calculate the real estate transfer tax, the taxable person makes an advance payment to the tax office. The tax office then later credits this amount towards the final tax within the framework of the income tax assessment.

Final Discharge Effect with Self-Assessment

If the real estate income tax is remitted through self-assessment, it has a final discharge effect. This means the tax is considered fully settled. No further entry in the income tax return is required.

The advance payment is an exception: The tax office credits it during the assessment, but it is not automatically considered finally taxed.

Assessment Option and Standard Taxation

Anyone who sells a property can voluntarily declare this transaction in their tax return. This so-called assessment option not only allows for the correction of incorrect calculations but also the offsetting of losses from other sales.

Alternatively, the standard taxation option can be chosen. If the personal income tax rate is below 30%, the tax burden on the profit from the sale is reduced accordingly. The crediting takes place within the framework of the regular income tax assessment.

Your Benefits with Legal Assistance

Real estate income tax raises numerous questions in practice. With well-founded legal advice, you can avoid financial disadvantages and create tax clarity before signing the contract.

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Frequently Asked Questions – FAQ