Speculation tax on propertywhen a sale is taxable
The term "speculation tax" (Spekulationssteuer) does not exist in German law. What it refers to is income tax on gains from a private sale transaction (privates Veräußerungsgeschäft) under § 23 of the Income Tax Act (Einkommensteuergesetz, EStG). For property, a ten-year period applies – with important exceptions.
This guide in one minute
The key points of this guide as a short video. All details and worked examples are in the text below.
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Inhalt dieser Seite (11)
- The basic rule: ten years
- The most important exception: owner-occupation
- How the gain is calculated
- Inheritance and gifts
- Caution: commercial property dealing
- Typical cases at a glance
- Special cases that are often overlooked
- Five strategies to avoid or reduce the tax legally
- Calculating the period correctly: how it works
- Speculation tax and investment: two strategies
- Documents you need for your tax return
Key points at a glance
- Gains from selling a privately held property are taxable if less than ten years pass between purchase and sale (§ 23 EStG).
- The sale is tax-free if you lived in the property yourself in the year of sale and the two preceding years.
- Only the gain is taxed: sale price minus acquisition and construction costs, plus depreciation already claimed, minus selling costs.
- With inheritance and gifts, the new owner takes over the previous owner's holding period.
- The gain is taxed at your personal income tax rate; total gains below €1,000 a year remain tax-free.
The basic rule: ten years
If you sell a property held as private assets within ten years of acquiring it, the gain is subject to income tax. In each case, the dates of the notarised purchase contracts are decisive – not the entry in the land register (Grundbuch) or the handover.
Example: purchase contract on 15 March 2017, sale contract on 16 March 2027 – tax-free. Sale contract on 14 March 2027 – taxable.
The most important exception: owner-occupation
A sale is also tax-free within the ten-year period if you lived in the property yourself
- throughout the entire period between acquisition and sale, or
- in the year of sale and in the two preceding calendar years.
For the second option, a continuous period that touches three calendar years is sufficient. For example, anyone who lives in the flat themselves from 1 December 2024 to 31 January 2026 and sells it in 2026 meets the requirement. Use by children for whom you receive child benefit (Kindergeld) also counts as owner-occupation. A holiday flat that you do not let and use yourself may also qualify.
How the gain is calculated
| Item | Example |
|---|---|
| Sale price | €280,000 |
| − Acquisition costs (purchase price + purchase costs) | − €215,000 |
| − Subsequent construction costs (e.g. conversion) | − €20,000 |
| + Depreciation already claimed (AfA) | + €28,000 |
| − Selling costs (estate agent, energy performance certificate) | − €10,000 |
| = Taxable gain | €63,000 |
The gain is taxed at your personal income tax rate. At a marginal tax rate of 35%, that would be around €22,000 in the example, plus the solidarity surcharge (Solidaritätszuschlag) and church tax where applicable.
Exemption limit (Freigrenze): if the total gain from all private sale transactions in a year is below €1,000, it remains tax-free (since 2024; previously €600). This is an exemption limit, not an allowance – if it is exceeded, the entire gain is taxable.
Inheritance and gifts
With an inheritance or gift, the new owner steps into the legal position of the previous owner. The ten-year period therefore continues to run from the purchase by the testator or donor. If your mother bought the house in 1998 and you inherit it in 2026, you can sell it immediately tax-free.
An inheritance itself is not an acquisition. However, if you buy out co-heirs' shares, a new period begins for those shares.
Caution: commercial property dealing
Anyone who buys and resells more than three properties within five years may be classified as a commercial property dealer (gewerblicher Grundstückshandel, the "three-property rule"). All gains are then subject to income tax and trade tax, regardless of the holding period.
Typical cases at a glance
| Situation | Taxable? |
|---|---|
| Owner-occupied house, sold after four years | no (owner-occupation) |
| Rented flat, sold after twelve years | no (period has expired) |
| Rented flat, sold after six years | yes |
| Bought in 2023, rented out until 2025, owner-occupied from January 2026, sold in 2027 | yes – the owner-occupation does not cover the year of sale and two full preceding years |
| Bought in 2020, owner-occupied until February 2024, then empty, sold in December 2026 | yes – a whole calendar year (2025) without owner-occupation lay between moving out and the sale |
| Bought in 2021, owner-occupied until December 2024, rented out from January 2025, sold in 2025 | no – 2023, 2024 and 2025 were years of owner-occupation |
| Inherited house, bought by the testator in 2005, sold immediately | no (the testator's period continues) |
| Undeveloped plot, sold after five years | yes – there is no owner-occupation for building land |
The borderline cases show that a difference of just a few months in the sale date can decide several tens of thousands of euros. So plan the notary appointment with the deadline in mind – we align the start of marketing accordingly.
Special cases that are often overlooked
Home office: if you have claimed a home office for tax purposes in your owner-occupied home, according to the case law of the Federal Fiscal Court (Bundesfinanzhof, 2021) the proportional gain attributable to it is also not taxable. The home office counts as part of your own home.
Partial letting: if you let a granny flat (Einliegerwohnung) in your own house, only the part of the gain attributable to the rented flat is taxable – provided the ten-year period is still running.
New build on your own plot: if a building is erected within the period and the plot is sold together with the building, the construction costs are also part of the calculation. The period, however, depends on the purchase of the plot.
Divorce: if one partner transfers their share of the house to the other in return for a compensation payment, this can be a taxable sale transaction – even between spouses. It only remains tax-free if the transferring partner lived in the property themselves until the transfer or the ten-year period has expired. Moving out years before the transfer becomes expensive. More under Property in a divorce.
Splitting a plot: anyone who divides a large plot and sells a building plot also needs to keep the ten-year period in mind – the separated part of the garden was usually not "lived in" by the owner.
Five strategies to avoid or reduce the tax legally
- Wait for the period to end. If the ten years will soon be reached, it is almost always worth postponing the notary appointment. Marketing can start beforehand; what matters is the date of the purchase contract.
- Move in yourself. Anyone who gets a rented flat back without having to give notice (for example after the tenant moves out) and uses it themselves across three calendar years can then sell tax-free. This needs careful planning.
- Document all costs. Notary, land register, land transfer tax (Grunderwerbsteuer), estate agent's commission on purchase and sale, subsequent construction costs – every receipt reduces the gain.
- Time the sale for a low-income year. The gain is taxed at your personal tax rate. In the first year of retirement or a sabbatical year, this is often considerably lower.
- Offset losses. Losses from other private sale transactions (such as another property) in the same year reduce the gain; losses from shares, however, do not count for this.
Which option is right should always be confirmed by a tax adviser. We provide the figures needed: valuation, expected sale price and realistic marketing period. See also Tax-efficient investment and Depreciation on property.
Calculating the period correctly: how it works
The ten-year period is calculated to the exact day – from the day of the notarised purchase contract to the day of the notarised sale contract. Some finer points:
| Situation | relevant date for the acquisition |
|---|---|
| normal purchase | date of the notarised purchase contract |
| purchase with a condition precedent (e.g. approval) | in principle the date of the contract, check the individual case |
| inheritance | the testator's purchase date |
| gift | the donor's purchase date |
| plot bought, house built later | purchase date of the plot for both |
| declaration of division after purchase | purchase date of the original plot |
A preliminary contract, a reservation or a verbal agreement do not count. The date of entry in the land register is also irrelevant for the period.
Speculation tax and investment: two strategies
Many property investors deliberately plan their investments around the ten-year period:
Hold for the long term: anyone who holds a rented flat for at least ten years sells tax-free. During this time, depreciation and loan interest reduce tax. At the end, the increase in value is tax-free. This strategy suits stable locations with long-term demand – such as Bamberg or Bayreuth. → Investment property
Reallocate before the period ends: anyone who sells earlier pays tax on the gain, but can reallocate capital into a better investment. This can make sense if the location deteriorates or major renovations are due. Your tax adviser will calculate whether it is worthwhile.
Documents you need for your tax return
If a sale is taxable, you will need the following for Annex SO (Anlage SO) of your income tax return:
- notarised purchase contract (acquisition) and sale contract
- invoices for the notary, land register, land transfer tax and estate agent on purchase
- invoices for subsequent construction costs (conversion, extension)
- an overview of the depreciation claimed in previous years
- costs of the sale (estate agent, energy performance certificate, early repayment penalty only in exceptional cases)
Always keep purchase documents for at least ten years – even for owner-occupied properties, in case their use changes.
Frequently asked questions
Do I have to pay speculation tax when I sell a holiday flat?
If you sell the holiday flat within ten years and it was let, yes. If you used it exclusively yourself, the owner-occupation exemption may apply. With mixed use, the legal situation is complicated – take advice.
Does the ten-year period also apply to a garage or parking space?
Yes, if the garage or parking space is bought and sold separately. If they belong to the owner-occupied flat, they are treated the same way and are also tax-free with owner-occupation.
Do I have to pay speculation tax if I sell at a loss?
No. A loss does not trigger tax. It can, however, be offset against gains from other private sale transactions – in the same year, the previous year or the following years.
Does an early repayment penalty count as a selling cost?
According to case law, usually not, because it relates to the financing and not to the sale itself. There are exceptions, for example when the purchase contract requires the property to be transferred free of encumbrances. Have this checked in the individual case.
Can I use a loss from a property sale for tax purposes?
Yes, but only to a limited extent. Losses from private sale transactions can only be offset against gains from other private sale transactions – in the same year, the previous year or the following years. They cannot be offset against salary or rental income.
Does the ten-year period also apply to commercial property?
Yes, if the commercial property is part of private assets and is let. If it belongs to a company's business assets, any gain on sale is taxable regardless of the holding period. More under Tax aspects of commercial property.
Is speculation tax due if I sell my rented house after eight years?
Yes, the gain is taxable because the ten-year period has not yet expired and there was no owner-occupation. Check whether a sale after the period expires would be worthwhile.
Do I have to pay speculation tax if I have inherited a house?
Only if less than ten years lie between the testator's purchase and your sale and none of the exceptions applies. More on inherited property in our guide Inheritance & property.
Who reports the sale to the tax office?
The notary reports every property purchase contract to the tax office. You must declare the gain from a private sale transaction yourself in your income tax return (Annex SO). For tax planning in the individual case, we recommend a tax adviser.
Sources & further reading
- gesetze-im-internet.de – § 23 EStG – private sale transactions
- lfst.bayern.de – Bavarian State Tax Office
- bundesfinanzministerium.de – Federal Ministry of Finance – BMF circulars on private sale transactions
- bundesfinanzhof.de – Federal Fiscal Court – case law on owner-occupation and home offices
- gesetze-im-internet.de – § 22 EStG – exemption limit and loss offsetting for other income
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