Speculation tax — tax minimization for homeowners

Speculation tax for real estate — how high is it and how is it calculated

who acquires a property as an investment should think in advance about how long the property should be held and from what point in time a sale could become an issue. This is because, under certain conditions, the sale of real estate is subject to the so-called speculation tax, which can significantly reduce a sales profit. With the sale, the speculation tax must be paid to the tax office.

The speculation tax for the sale of real estate generally applies when a property is sold privately for profit. The term speculation tax is only used colloquially and is officially referred to as “income tax for private sale transactions.” The amount of speculation tax is calculated depending on the owner's annual income. For this purpose, the capital gain is counted as additional income and charged at the respective tax rate. With higher incomes, this can be up to 45 percent. In contrast to the capital gains tax of 25 percent when selling shares, a real estate sale is therefore taxed significantly higher, particularly among high-income earners. The tax liability is unlimited and can also be collected retrospectively by the tax office. Anyone who wants to sell a property should therefore absolutely comply with the conditions for collecting speculation tax, as this significantly reduces the sales profit.

Even anyone who inherits a property does not automatically escape income tax for private sale transactions, because it looks at how long the previous owner owned the property and how he used it. Basically, the same conditions apply as when selling a home. However, since property owners comply with the applicable conditions long before selling, tax liability can be waived.

This is how no speculation tax is due

There are various conditions that must be met in order for the speculation tax to be paid. First of all, the sale of consistently owner-occupied real estate is preferential from a tax perspective, as there is a reduced speculation period of three years. If, on the other hand, the house or apartment is rented out, there is a period of ten years after which the speculation tax no longer applies. If a rental property has therefore been purchased as an investment, it is advisable to hold it for at least ten years before a sale can take place on particularly favourable terms.

Speculation tax is due even if a property is only partially leased out. If the owner of a condominium lives in part of the apartment but rents out the remaining part, speculation tax would be levied as follows if the property was sold:

• Sales after less than three years: on the entire object
• Sales after three to ten years: on the rented share
• Sales after ten years: no speculation tax

An attempt to conceal the sale of the property from the tax office would be grossly negligent and otherwise useless, because the new buyer must pay real estate transfer tax on the purchase. In this way, the tax office learns anyway that the property has been sold and, in case of doubt, the speculation tax must be paid.

Pay attention to speculation tax even before buying real estate

In order to be able to safely avoid speculation tax when selling real estate, the following factors should be considered in advance:

• continuous use of the property by the owner, so that an early tax exemption can take place when selling.
• Partial self-use of the property, for tax relief upon sale after three years.
• In the case of a Holding period of the property of at least 10 years The owner does not have to pay speculation tax when selling.

Reduce the tax burden by specifying the costs incurred

When selling a property, all sales costs incurred should be stated in order to effectively reduce the tax burden. The following items are deductible for the collection of speculation tax:

• Advertising costs for ads
• Notary fees
• Real estate transfer tax and land register entry costs
• Brokerage fees both when buying and selling
• Costs for repairs and modernizations that increase the value of the property

It can therefore be stated that the speculation tax can be significantly reduced with a few well-considered steps and is completely eliminated under certain conditions. For real estate sellers, this can quickly save tens of thousands of euros. Private investors who invest in real estate, in turn benefit from potential interest gains with the help of such savings.