Can real estate be gifted tax-free?
September 14, 2023 | 50,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
My name is Wilhelm Schottmann and I have a question regarding gift tax in relation to real estate. My father wants to gift me his house, as he can no longer live in it himself and I would like to take over. Now I am wondering if it is possible to gift real estate tax-free or if gift tax applies.
The situation is as follows: My father is already retired and wants to transfer his house to me for personal reasons. The house has a considerable value, which he would like to gift to me to help me financially. However, I am unsure if gift tax would apply and if I would be able to handle it.
My concern is that I am not sufficiently informed about the tax aspects of transferring real estate and therefore may have to unexpectedly make high tax payments. Therefore, I would like to know from you if there is a possibility to gift real estate tax-free or if there are alternative solutions to minimize the tax burden.
I would be very grateful if you could assist me in this matter and show me possible solutions. Thank you in advance for your support.
Sincerely,
Wilhelm Schottmann
Dear Mr. Schottmann,
Thank you for your inquiry regarding gift tax in relation to real estate. It is understandable that you are concerned about whether gift tax will be due when transferring your father's house to you and how high it could be. I am happy to explain the tax aspects in relation to gifts of real estate to you.
In general, gift tax is due when transferring real estate by gift. The amount of gift tax depends on the fair market value of the property at the time of the gift and the relationship between the donor and the recipient. Depending on the value of the property and the relationship, different tax rates may apply. However, there are exemptions up to which a gift remains tax-free. For children, for example, the exemption is 400,000 euros every 10 years.
There are ways to minimize the gift tax burden. One possibility is to use exemptions, for example by using the exemption from both parents if they are giving jointly. Another approach is to transfer partial parcels of land to reduce the value of the gift.
Furthermore, you can check if there are specific tax advantages for transferring your father's house to you. In some cases, a gift during one's lifetime may be more tax advantageous than inheritance upon death.
It is advisable to consult with a tax advisor in an individual tax consultation regarding the specific situation and the best course of action. A tax advisor can help you analyze the tax implications of the gift of real estate and provide you with tailored solutions.
I hope this information has been helpful to you. If you have any further questions, please feel free to contact me.
Sincerely,
Bernd Schreiber, Tax Advisor
