From next year, real estate should be valued more closely to its market value in the event of a gift or inheritance. In many cases, this could lead to a higher tax burden. So what to do?
Anyone who inherits or receives a property as a gift usually has to pay inheritance or gift tax on it. Because the value of many properties is likely to increase from next year due to changed valuation methods, the tax burden will also be higher in many cases. But what exactly is changing? And why at all? Answers to the most important questions.
What changes in property valuation in the case of donation and inheritance?
There are essentially three methods for assessing a property for tax purposes: the material value method, the earnings value method and the comparative value method. In two of the three methods, certain operands change to the detriment of consumers.
In the material value method, the so-called material value factor changes - a key figure that adjusts the structural value of a property to the sales revenue that can actually be achieved in the respective region. According to Sibylle Barent, this applies to the house owners' association
In the discounted earnings method, the so-called real estate interest - a kind of forecast for the value development of a property at the respective location - and the deductible management costs, which include maintenance costs, are adjusted. According to Barent, rented properties are particularly affected.
A new regional factor is also being introduced, which is intended to reflect the differences between the national average and the regional construction cost level of a property to be evaluated.
Also new: The total useful life for certain types of buildings - especially single and two-family houses and residential property - is to be increased from 70 to 80 years, says Claudia Kalina-Kerschbaum, Managing Director of the Federal Chamber of Tax Advisors. This also leads to higher real estate values.
Why is the property valuation changed at all?
"The legislature is now implementing constitutional requirements that have been in place for some time," says Sibylle Barent. The aim is to standardize the valuation of real estate nationwide and to determine the values more in line with the market.
When will the changes take effect?
The changes will come into force on January 1, 2023, subject to the approval of the federal states.
Why do the changes in real estate valuation lead to a higher tax burden?
Many real estate values will increase in the future due to changes in valuation methods. The value of a property serves as the assessment basis for inheritance and gift tax, which automatically increases with it. Because tax allowances remain unchanged at the same time, the tax burden for heirs and recipients is higher.
What should owners and beneficiaries know now?
The changes in the valuation process will not necessarily mean that heirs and recipients will have to pay inheritance or gift tax from 2023. "If the personal allowances are not exceeded even after the new assessment, the planned changes will have no effect," says Claudia Kalina-Kerschbaum.
In addition, those affected still have the option of evaluating using the unchanged comparative value method. Here, the value of a property is derived from the market value, which was determined by the locally responsible expert committees from the sale of comparable properties. According to the managing director of the Federal Chamber of Tax Advisors, this is possible for single and two-family houses, condominiums and part ownership. The shortcoming: "The comparative value method can only be used if the corresponding data is available."
"The possibility of proving the value of the property by means of an appraisal also remains," says Daniela Karbe-Gessler from the Taxpayers' Association. A competent expert committee or expert could actually find lower market values in it. "But the tax offices are becoming increasingly critical here," says Sibylle Barent.
What other options are there for escaping the potentially increasing tax burden in the coming year?
"If the owners and the beneficiaries were planning to transfer a property anyway, it might make sense to do it this year," says Claudia Kalina-Kerschbaum. However, she expressly warns against hasty transfers just to prevent a higher rating. "Because such a complex decision with lasting consequences should be well thought out." If you want to undo the transfer later, you have to dig deep into your pocket.
In principle, property owners can also make use of the allowances when making a donation, which vary depending on the degree of relationship. Parents, for example, can give children up to 400,000 euros tax-free every ten years. "If both parents own the property, each parent can, for example, transfer their share of up to 400,000 euros tax-free every ten years," says Claudia Karbe-Gessler.
If the value of the property exceeds the respective allowances, the property can be transferred gradually. Then, however, those affected should plan well in advance, because the allowances can only be exhausted every ten years.
Good to know: If the inheritance concerns the parental home, for example, children can benefit from a tax exemption if they move in themselves. However, this is only possible with properties whose living space is no more than 200 square meters. In addition, heirs must have lived in the property for at least ten years.
