How is inheritance tax calculated?
Inheritance tax is divided into three different tax brackets depending on the relationship to the deceased. The closer the relationship, the higher the tax-free amount and the lower the tax burden. There are three tax brackets:
- Tax class I: Spouses, registered partners, children, grandchildren (if the testator's parents are already deceased) and parents of minor children. This group has the highest tax-free allowances and the lowest tax rates.
- Tax class II: Grandchildren, children-in-law, siblings, nephews and nieces. They have lower tax-free allowances and higher tax rates than tax class I.
- Tax class III: All other persons, such as friends, distant relatives or non-relatives, who also have to pay tax on inherited assets. This group has the lowest tax-free allowances and the highest tax rates.
Allowances and tax allowances
The amount of inheritance tax is influenced by the allowances, which vary depending on the tax bracket. Some examples of the allowances are
- Spouse: Up to 500,000 euros tax-free.
- Children: Up to 400,000 euros tax-free.
- Grandchildren: Up to 200,000 euros tax-free.
- Friends and distant relatives: Only up to 20,000 euros tax-free.
As soon as the value of the inherited assets exceeds the respective tax-free amount, tax is levied on the excess amount. The tax rate increases depending on the value of the inheritance and the tax bracket.
How high is the tax rate?
The tax rate varies depending on the amount of the inherited assets and the tax class. In tax class I, the tax rate starts at 7 % and can be up to 30 %, depending on the value of the inheritance. In tax brackets II and III, the tax rates are significantly higher, starting at 15 % and capping at 50 % for particularly large inheritances.
Special regulations for real estate
There are special tax regulations for the inheritance of real estate. The market value of the property at the time of inheritance is used to calculate the inheritance tax. In some cases, however, tax concessions such as the so-called „exemption discount“ for owner-occupied properties can also be applied to reduce the tax burden.
Conclusion: Inheritance tax can be a considerable burden, especially for large assets. Early planning and advice, particularly with regard to tax allowances and tax rates, can help to minimise the tax burden. It is advisable to consult a tax advisor or lawyer at an early stage in order to optimise the tax implications of the inheritance and, if necessary, to optimise the transfer of assets through gifts or other measures.
- Select interested parties specifically
Demand for property is high. Instead of wasting your time with viewings, you should filter interested parties in advance:
- Use meaningful adverts with high-quality photos.
- Offer prospect questionnaires to identify serious buyers.
- Avoid open viewings, which often bring more chaos than success.
- Present your property in the best possible way
First impressions count - and can be decisive for the sales price:
- Clean up thoroughly and remove personal items.
- Invest in small improvements, such as a fresh coat of paint.
- Use home staging to make the property more inviting.
- Be well prepared professionally
Buyers have questions - be prepared for them:
- Do you know all the important data about the property, such as year of construction and energy consumption?.
- Research details about the neighbourhood, such as schools and shopping facilities.
- Clarify any defects openly and make their inclusion in the offer price clear.
A real estate agent can help you to select prospective buyers, organise viewings and negotiate professionally. An expert will save you time and maximise the proceeds from the sale.
