When is tax due on gains on sale?

The ten-year period applies to any private individual who wishes to sell a property within 10 years. The sale is possible, but subject to the payment of tax, which must be paid as part of income tax. This means that if the house was purchased on January 1, 2020, it can be sold tax-free on January 1, 2030.

However, as with many regulations, there are exceptions to this, which can be clarified with a tax advisor. For example, the deadline does not apply if the property was used for own residential purposes. In this respect, no tax is payable on the proceeds, even if the property is sold after just one year.

However, this exception does not only apply to the main residence, but also includes vacation homes or second homes. A city real estate agent is usually aware of this and could provide further clarification. In general, the sale should only be carried out by an estate agent, as they will take care of all the bureaucratic hurdles.

How high is the income tax?

In Germany, there are no flat rates of income tax, so the tax rate depends on the level of income. In addition, all liabilities are also taken into account, such as the costs for the notary, a real estate agent and also for travel costs to viewing appointments and expenses for advertisements.

The sales proceeds and all expenses are recorded in the "Other income" annex. If payment in installments has been agreed, there is even relief. The seller benefits accordingly from the exemption limit of 600 euros per year. It could also make sense to defer the capital gain if less income is expected in the following year.

How can a property be sold?

There are currently a number of hurdles due to coronavirus, both when building and selling a house. Construction companies usually have the problem that the materials cannot be procured because some companies have ceased operations. On the other hand, there are restrictions in sales, as normal viewings are hardly possible.

The industry is therefore switching to online viewings, which take place via FaceTime, Zoom or Skype, for example. If the prospective buyer is still seriously interested, then a real viewing should also take place, but at a minimum distance of 1.5 meters.

All of these regulations and challenges make the sale of a property extremely difficult, which is why hardly any private individuals are willing to put up with the stress and instead hire an estate agent directly. This agent also has knowledge of tax law, which could potentially save even more money.

Date: 01.07.2020