Inheriting a property sounds like an increase in wealth, but it also entails financial obligations – from inheritance tax and renovations to ongoing ancillary costs. If you keep track of taxes, deadlines and maintenance, you can make informed decisions and protect your inheritance.
Before you plan any concrete steps, you should first determine the market value of the house. An independent expert opinion or a professional market price assessment provides the basis for correctly calculating tax-free allowances, estimating financing requirements and realistically setting selling prices. Without a well-founded value, there is a risk of incorrect tax assessments, lengthy disputes between co-heirs and unnecessary losses of time and money.
When is inheritance tax due?
Whether and how much inheritance tax you have to pay depends on two factors in Germany: the family relationship and the assessed property value. Spouses are currently entitled to an allowance of 500,000 euros, children 400,000 euros, while siblings and parents-in-law, for example, can only deduct 20,000 euros. If the value of the property exceeds this limit, a graduated tax of seven to thirty percent applies. If the property is the previous family home and the surviving partner moves in immediately or remains living there, the tax is waived completely – this applies to children up to 200 square meters of living space. It is important that the inheritance is reported to the tax office no later than three months after the inheritance is known, otherwise there is a risk of surcharges.
Running costs of the inherited property
After the tax assessment notice, the everyday costs begin. Property tax, building insurance, maintenance and minor repairs continue even if the property is vacant. Roughly calculated, these mandatory charges eat up one to two percent of the market value each year. Added to this are electricity and heating provision, chimney sweeps, refuse collection and, if applicable, property management fees.
If the house stands empty for a longer period of time, moisture damage, vandalism or new energy requirements can force expensive renovations. If there is also an old mortgage loan on the property, the heir will have to continue the installments or renegotiate them. Without solid reserves, the inherited house can become a financial burden more quickly than many expect.
Sale as a way to relieve pressure
Those who neither want to move in themselves nor rent out often achieve the greatest planning security through a prompt sale. The proceeds and taxes are clearly calculable, there are no ongoing expenses and the capital is freely available. The only thing to bear in mind is the ten-year period for speculation tax: if less than ten years elapse between the deceased’s purchase and your sale, the increase in value must be taxed as normal – unless the house was used for residential purposes in the year of the sale and in the two previous years. Expert advice from an experienced estate agent can be particularly useful in clarifying such questions.
Are you facing difficult decisions regarding your inheritance? Talk to us – we will clarify your options and, if you wish, accompany you through to a lucrative sale that will take the pressure off you in the long term.
Notes
The generic masculine is used in this text to improve readability. Female and other gender identities are explicitly included where this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.
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