"Can I sell my property tax-free after 10 years?"
In our experience, owners often ask themselves how best to proceed with the sale of their property from a tax perspective. Dealing with the speculation period is an obvious choice - because the opportunity to enjoy tax advantages suddenly arises. But what exactly does this period mean and what impact does it have on the sale of a property?
While we do not provide tax advice in this article, we offer a general overview of the speculation period and its importance for real estate sales.
Selling a property tax-free? The most important facts in brief
- Speculation tax is a form of income tax.
- It applies from the signing of a real estate purchase contract ...
- ... and amounts, with exceptions, to a period of 10 years.
- In the case of a sale transaction within the speculation period, the profit must be taxed.
- If a property is sold after the deadline, speculation tax may not apply.
- This regulation is anchored in § 23 of the Income Tax Act (EStG).
- The speculation period only applies to private real estate sales.
Speculation period for real estate explained in 30 seconds
The speculation period for real estate refers to the period during which profits from the sale of a property are taxable. This period begins on the day on which the purchase contract for a property is signed. Once the speculation period has expired, the profits - under certain conditions - no longer have to be taxed. Factors such as own use of the property or commercial space play a role.
NoteFor rented properties, speculation tax does not apply after ten years. The speculation period for owner-occupied properties expires after just three years.
Curbing speculative real estate trading
The primary aim of the speculation period is to curb speculative trading in real estate.
Definition of
Speculative transactions in the real estate sector refer to short-term transactions. Buyers acquire properties with the intention of selling them again after a short period of time at a higher profit. They speculate that real estate prices will rise in the short term, which enables quick sales transactions.
These fast-moving transactions can influence prices on the real estate market. They focus less on the long-term value of real estate and more on short-term price fluctuations, which can lead to instability.
By inhibiting this trade, the speculation tax makes long-term investments more attractive again. This reduces price volatility in the long term.
Speculation period for real estate: (Non-binding) insight into taxes
Disclaimer: We do not offer tax advice, but look at the topic of speculation tax through an industry lens. An exciting sub-topic in real estate managementwhich comes up again and again when advising our owners. We are happy to draw on our network for specific tax advice.
What we can say without obligation:
- According to German tax law capital gains are taxable within three (own use) or 10 years (rental).
- Profits from the sale of real estate must be included in the income tax return must be declared.
- If the speculation period has expiredtax relief may be available to the owners.
Particularly important: The speculation period only applies to private real estate sales. A person who sells more than three properties within five years can be classified by the tax office as a commercial property trader - and must bear the tax consequences.
Interesting: There are probably situations that always result in an income tax liability on the sale of real estate, regardless of the expiry of the ten-year period. For example: What if the apartment is partly used as a home office or half of a house is used commercially?
Read up carefully or seek professional tax advice.
Selling your property tax-free after 10 years - how to proceed
As a reminder, the speculation period for owner-occupied properties ends after just three years. Rented property is subject to speculation tax for 10 years. The decisive factor is the date of the contractually agreed purchase.
- Before the deadlineIs it financially viable to sell before the deadline? Are there opportunities to find (new) tenants for the apartment or house? Monitor the market and market price estimates.
- After the deadlineLogical with real estate: Do not act hastily. At what point can you achieve maximum profit? Before the sale renovation or modernization work possible possible to increase the value of your property?
No matter when, gather all the important documents together before the sale transaction. Of course, the purchase contract, information about any renovations or proof of the intended use of the property are important.
We have selected the latest market developments in purchase prices in Berlin from the Berlin 2023 Residential Market Report by BERLIN HYP & CBRE:
FAQ - Understanding speculation periods and taxes
The topic around the Speculation period of real estate is very complex. As every situation is individual, it is best to seek professional and personal advice in advance.
Now we will answer three frequently asked questions about speculation periods and taxes, from the perspective of property manager. In a nutshell.
When does the speculation period begin?
The speculation period begins on the day the property is purchased. In the case of a new build, the date of completion applies. This date is decisive for the tax treatment of profits if you wish to sell your property.
Does the speculation period for a property also apply to inheritance?
Yes, but this is a special case: in the case of an inheritance, the speculation period does not start again. The original acquisition date continues to apply.
An example: Your parents bought an apartment in 2020 and rented it out as a long-term investment. However, as part of the inheritance, this apartment is transferred to you in 2028. The period does not start anew; the apartment can be sold tax-free from 2030. The 10-year period applies to rented properties.
How high is the speculation tax on the sale of a house, apartment or plot of land?
The tax is only indirectly dependent on the type of ownership. As the profit counts as regular income, the individual income tax rate of the seller is relevant. The tax therefore also depends on the profit. Other factors are also included in the speculation tax. Please inform yourself.
EichenGlobal GmbH does not offer binding tax advice
