Massive tax increase on property inheritance: bring forward your contract now!
Heirs and testators of real estate will be hit hard from 2023! An increase in inheritance and gift tax of up to 30 to 40 percent is possible due to a change in the value figures for houses and properties. Now is the time to act quickly: Recognized experts advise bringing forward the inheritance and signing the contracts this year if possible. The law firm Haas und Kollegen is the strong partner at your side.
This news hits many people hard just before the end of the year: inheritors of real estate will face higher inheritance and gift taxes from January 2023. These could be in the region of 30 to 40 percent, or even higher in the worst case. The measure will be worthwhile for the state, as every second inheritance in Germany involves houses and real estate. A total of almost 400,000 properties are inherited every year. Many of those affected are now asking themselves whether the future inheritance really needs to be lower or whether there is a way to avoid the excessive payments. There is a chance, but contracts need to be drawn up quickly.
Amendment of Annex 25 to the Valuation Act
The reason for the massive increases in inheritance and gift tax on real estate is an amendment to Annex 25 of the Valuation Act. The so-called value figures are decisive here. In cases where a property has to be valued but no comparative value procedure can be carried out due to a lack of similar properties, the asset value procedure is used. Here, the value of the land and the assumed production costs for the house are determined separately. The sum of these two values is then multiplied by a material value factor provided by the expert committees. If this material value factor is not available, the tax authorities have defined so-called value figures in Annex 25 to Section 191 of the Valuation Act, which will be amended by the Annual Tax Act 2023. And there is quite an expensive catch here.
Value figures are exploding: Things are getting tough for heirs and testators
This is because the so-called value figures will rise from 0.9-1.0 to 1.3-1.4. What may not sound like much at first turns out to be a massive additional burden for citizens on closer inspection. The current tax-free allowances will be exceeded far more quickly than before, resulting in horrendous additional expenses for heirs. An example where the tax-free allowances have already been exhausted:
If the land and building together have a provisional asset value of 1.1 million euros, this still amounts to 1.1 million euros after multiplication by the value figure of 1.0. At a tax rate of 19 percent, this results in a gift tax of 209,000 euros. If the calculation is carried out with a value figure of 1.4, this results in a tangible asset value of 1.54 million euros and therefore a gift tax of 292,600 euros. This means an additional tax burden of 83,600 euros.
What property owners should do now!
The valuation of the property plays a decisive role here. The higher the price is assumed, the faster the statutory tax-free allowances are exhausted and the higher the tax burden is accordingly. Experts are now advising people not to wait any longer and to transfer properties before the end of the year. Hans-Joachim Beck, Head of the Tax Department of the German Real Estate Association IVD, recommends that property owners who are planning to transfer their home to the next generation bring this forward and sign the contract before the end of the year. There is a need for haste here, as the contracts have to be notarized and many notaries do not offer appointments over the holidays until New Year.
Expertise in inheritance law and tax law - Contact us now
Do you want to transfer your home before the end of the year and avoid the cost trap? Then you need to be quick now! We can advise and support you in transferring your property before the end of the year. Save yourself and your children and grandchildren money and take action today. Contact our law firm and secure the best advice and the best possible service when it comes to real estate inheritance. We are at your side!
