Is a donation of real estate tax-deductible?
May 20, 2022 | 60,00 EUR | answered by Fred Wittik
Dear tax advisor,
My name is Gabriele Hagedorn and I have a question regarding gift tax related to real estate. My father wants to gift me one of his properties, and I am wondering if this gift is tax-advantaged.
The property in question is a single-family house that has been in the family for many years. My father wants to gift it to me so that I can use it as my own home. However, I am unsure if gift tax would apply and how much it would potentially be.
I am worried that the gift tax on the property could be so high that I may not be able to afford it. Are there any ways to avoid or at least reduce the gift tax? Are there specific tax-free allowances that I can use to decrease the tax burden?
I would greatly appreciate it if you could assist me with this question. I would like to accept my father's gift, but I also want to ensure that I am not financially overwhelmed.
Thank you in advance for your support.
Sincerely,
Gabriele Hagedorn
Dear Mrs. Hagedorn,
Thank you for your question regarding gift tax in relation to real estate. It is understandable that you are concerned about whether your father's gift is tax-advantaged and what implications this could have for you.
In general, gift tax is applicable to gifts of real estate, as it is a gift with a high value. The amount of gift tax depends on factors such as the value of the property, the relationship between the donor and the recipient, and the respective tax exemption.
In your case as the daughter of your father, the following tax exemptions apply for gifts: For children, the exemption is €400,000 every 10 years. This means that you can receive gifts up to this amount tax-free. If the value of the property exceeds this exemption, gift tax will be due on the excess amount. The amount of gift tax depends on the tax rate, which varies depending on the federal state.
However, there are ways to avoid or at least reduce gift tax. One option is to structure the gift with reservation of usufruct, where the donor retains the right to use the property and you only receive it in full after his death. Additionally, dividing the property into different shares can help reduce the tax burden.
It is advisable to consult a tax advisor when planning a gift of real estate in order to consider all tax aspects and find the best possible solution. Your tax advisor can help you minimize gift tax and ensure that you are not financially overwhelmed.
I hope that this information is helpful to you and I am available to assist with any further questions.
Best regards,
Fred Wittik
