The sale of a property will take place for very different reasons. Some decide to sell their condominium after years of use in order to find a new home. Others want to sell their investment property and already knew at the time of purchase that they would sell the property when the time was right.
But what about the tax aspects of selling a property? In particular: Can you keep the full amount of the profit from the real estate transaction or will taxes be levied? And is it possible to avoid paying these taxes?
What taxes are incurred when selling a property?
Taxes do not always have to be paid when selling a property. This depends, among other things, on the period within which a property is resold after purchase. Specifically, this refers to the so-called “speculation period” of ten years. If the property was used for your own residential purposes, the period is reduced to the year of sale and the two preceding calendar years.
However, if the necessary conditions for a tax-free sale are not met, speculation tax must be paid. Trade tax may also be payable if the sale of the property is classified by the tax office as commercial real estate or property trading. This is usually the case if three or more properties or plots of land are sold within five years. In addition to trade tax, VAT of 19 percent is also due in this case.
How high is the speculation tax on the sale of a property?
The actual speculation tax payable depends, among other things, on the property owner’s income tax rate. Deductible costs and expenses can be deducted from the sales price. However, invoices are required to be able to prove the costs to the tax office. For this reason, it is important to keep these invoices.
The following exemplary calculation illustrates this:
- Selling price of the property: € 600,000
- Acquisition costs of the property: € 250,000
- Costs for the sale: € 15,000
- Taxable profit: € 335,000
- Personal tax rate: 40 percent
- Speculation tax: € 134,000
- Profit after tax deduction: € 201,000
Is it possible to sell real estate tax-free?
Real estate can also be sold tax-free. However, a whole series of criteria must be met for this:
- Up to two disposals within five years can be sold without incurring trade tax or income tax
- the property is sold after the speculation period has expired, i.e. after more than ten years
- in the year of sale and the two preceding calendar years, the property was used by the seller.
If one of the latter two conditions is met, the condominium, house or land can be sold without having to pay speculation tax.
