Real estate heirs will face higher inheritance and gift taxes of 30 to 40 percent in the new year 2023. If you are unlucky and slip into a higher tax bracket due to new valuation rules, the inheritance or gift tax can multiply in extreme cases!
Hans-Joachim Beck, head of the tax department of the German real estate association IVD, recommends: “Anyone who plans to transfer their house to the next generation by way of anticipated succession should do so and sign the contract this year.”
Rainer Zitelmann has a doctorate in history, sociology and has been a member of the FDP for 28 years. He is also the author of the book “Psychology of the Super-Rich”.
Hurry is required because the contract has to be notarized and the notaries will only have a few free appointments at the end of the year. It is sufficient if the notarial contract is signed this year. The transfer of ownership can take place in 2023.
The increase in inheritance and gift tax is hidden in an amendment to Annex 25 to the Valuation Act through the Annual Tax Act 2022. This is about the so-called value figures: Actually, one- and two-family houses should be valued according to the comparative value method. Other sales cases are used as a basis.
The problem: Since comparable sales cases are often not available, single and two-family houses are often valued using the real value method. The value of the land and fictitious production costs for the building are determined. In order to adjust this value to the market level, the sum of these values is multiplied by a material value factor, which the expert committees are supposed to provide. For cases in which such material value factors are not available, the tax authorities have defined factors in Annex 25 to Section 191 of the Valuation Act, which are called value numbers.
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As a result, these values have been raised from the previous 1.0 to 1.3 or even 1.4 by the Annual Tax Act 2023 for houses in a good location.
Detached house, plot of land 600 m², standard land value 1,000 euros, provisional material value 1.1 million euros
Additional tax burden according to the Annual Tax Act 2023: 83,600 euros.Note: It is assumed that the allowances have already been exhausted.
However, the additional burden for heirs can also be much higher if a higher tax rate than before is applied due to the higher valuation. Different tax rates apply to inheritance tax, depending on the amount of inherited wealth. So it can happen that you slip into a higher level, so to speak, and in extreme cases the tax burden even multiplies. It is therefore advisable to act before the end of this year!
Another tip from Hans-Joachim Beck: “Despite the so-called standardized procedure, the property owner can lodge an objection with the tax office if he believes that the actual market value of his house is lower. In this case, he must submit an expert opinion proving this.”
This event with Rainer Zitelmann and Jürgen Michael Schick, President of the German Real Estate Association IVD, also deals with current developments in the real estate sector.
There are more changes coming in December. So that you don’t miss anything, we have summarized everything for you here.
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