Deducting real estate transfer tax – It is tax-deductible when renting out the property.
Real estate transfer tax can be deducted by property buyers for tax purposes if they rent out the property. Even in the case of business use, the real estate transfer tax is part of the incidental purchase costs. In both cases, the real estate transfer tax is not deducted all at once but is depreciated over 33 to 50 years, depending on the year of construction of the building, together with depreciation for buildings.
Real estate transfer tax is not property tax
Real estate transfer tax and property tax are different types of taxes.
Real estate transfer tax is a one-time payment due upon purchase and amounts to between 3.5% and 6.5% of the purchase price, depending on the federal state.
Property tax, on the other hand, is paid annually in quarterly installments. Its amount varies not only by federal state but also according to other criteria such as municipality size or property type.
Real estate transfer tax significantly increases transaction costs in real estate purchases
Real estate transfer tax is a major cost factor in property purchases and, along with brokerage fees, makes real estate transactions less flexible and more expensive compared to stock trading.
From an investor’s perspective and even for owner-occupiers, the real estate transfer tax is a disadvantage. However, from a societal standpoint, it is presumably beneficial, as it effectively slows down rapid real estate trading.
No real estate transfer tax for close relatives, inheritance, land division, or purchase price under €2,500
No real estate transfer tax is due when a property is sold between first-degree relatives, such as grandparents, parents, and children. This does not apply to siblings, as they are not considered first-degree relatives.
No real estate transfer tax is due for purchases under €2,500, even for transactions between unrelated persons. However, caution is advised: a sale well below market value may be considered a hidden gift by the tax office.
Inheritance transactions and purchases by co-heirs in the context of estate settlements are also exempt from real estate transfer tax.
Likewise, land division under Section 3 WEG is exempt from real estate transfer tax, provided no excess acquisition occurs, meaning no one receives more than their calculated share.
Land registry entry only after real estate transfer tax payment
After the real estate transfer tax has been paid, the tax office issues a so-called “certificate of non-objection.” Only with this certificate can the buyer be registered as the new owner in the land register.
Reducing real estate transfer tax
Private buyers can reduce real estate transfer tax in the following ways:
Separate purchase contracts for land and house
By purchasing land and house separately, buyers can save the real estate transfer tax on the house, as the tax applies only to land purchases, not house construction.
The purchases must be clearly separated in content and timing. The company that builds the house should not be the same as the one that sold the land. Moreover, at least six months should pass between the land purchase and house construction to ensure the tax office recognizes them as separate transactions.
Separate listing of inventory in the purchase contract
Real estate transfer tax applies only to permanently attached components of the property, not to movable items like built-in kitchens, saunas, or garden houses.
No real estate transfer tax for PV systems if power is fed into the grid and not an “in-roof system”
A photovoltaic system is exempt from real estate transfer tax only if the electricity is fed into the grid instead of being used privately and if the system is not an “in-roof system,” meaning a photovoltaic system that partially replaces the roof itself.