Ebeets will tend to become more expensive next year. The Federal Council has just approved the annual tax law with a large majority, which also provides for changes in the valuation of real estate in the case of inheritance and gifts. In many cases, a higher tax burden is likely to arise in the future.
The law goes back to a judgment of the Federal Constitutional Court, which called for a more market-oriented valuation. Demands by the Haus & Grund owners’ association and the CSU to increase the allowances for inheritances and gifts in this context were rejected by a majority of the SPD, Greens and FDP, and states that are also governed by the CDU also approved the law in the Bundesrat without higher allowances.
Specifically, a large number of adjustment screws are being turned in the valuation law. Mainly affected are rented properties, whose management costs are now calculated differently. The service life will also be increased from the previously assumed 70 years to 80 years. In addition, regional factors are introduced, which should lead to higher valuations, especially in metropolitan areas.
There are three methods of calculating real estate value. Nothing changes in the comparative value method, which is mainly used for single and two-family houses. Expert committees collect data and calculate values here. These are usually one to two years behind the current market development, but reflect the market value quite well.
The annual tax law does not change anything for the majority of single and two-family houses. Only where there are no comparable values, tending to be in rather sparsely populated areas, is the material value method used, the calculation method of which is now changing. Investment property is even more affected. This is where the discounted earnings method comes into play, the parameters of which have now been significantly adjusted.
The IWW Institute for Knowledge in Business has carried out a sample calculation using the new regulations. It turns out that the management costs will be lower in the future, which will increase the income from the property. The property interest rate, which is closer to the market, also leads to a higher imputed income. Together with the increased useful life of the building from 70 to 80 years, this results in a building value for inheritances and gifts of just under EUR 400,000 for a rented apartment building, compared to EUR 136,000 previously. In many other cases, the value will not jump as much. The Haus & Grund owners’ association assumes an average increase of 20 to 30 percent.
Whether a property is subject to inheritance and gift tax and how specific the tax burden is depends on the individual circumstances. Children can continue to inherit real estate from their parents tax-free if the real estate is occupied immediately and for at least 10 years and the living space does not exceed 200 square meters. The allowances for gifts and inheritances remain the same. They amount to EUR 500,000 between spouses, EUR 400,000 per child, EUR 200,000 per grandchild and in almost all other cases such as siblings, divorced spouses, nieces and nephews and all non-relatives EUR 20,000. The tax rates also depend on the degree of relationship and the amount of the gift or inheritance and range from 7 to 50 percent.
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