Do debts also have to be taken into account when inheriting?
September 24, 2023 | 40,00 EUR | answered by Alwin Widmann
Dear tax advisor,
My name is Friedhelm Koch and I have a question regarding inheritance tax. My father recently passed away and left me his house. However, he also left behind debts that burden the house. Now I am wondering if these debts must be taken into account when calculating the inheritance tax.
The current situation is as follows: My father has bequeathed a house worth €300,000, but the debts amount to €100,000. Therefore, the net value of the inheritance is €200,000. I am concerned that I may have to pay a high inheritance tax due to the debts, even though the house itself is worth less.
My question is therefore: Must debts also be considered when inheriting, and how does this affect the calculation of inheritance tax? Are there possible solutions to reduce the tax burden or take the debts into account when inheriting?
I look forward to your expert advice and thank you in advance for your support.
Sincerely,
Friedhelm Koch
Dear Mr. Koch,
Thank you for your question regarding inheritance tax. In your case, where your father has left you a house worth €300,000 but also left debts amounting to €100,000, there are indeed regulations that take into account that debts should be included in the calculation of inheritance tax.
In Germany, inheritance tax is calculated on the net value of the inheritance, which is the value of the inherited assets minus all debts and liabilities. This means that in your case, the tax-relevant amount is the net value of the house, which is €200,000. Therefore, inheritance tax will be calculated on this amount, and not on the total value of the house.
So, there is no need to worry that you will have to pay a higher inheritance tax due to the debts than the actual net value of the inherited house. The debts are taken into account in the calculation of the tax burden and thus reduce the taxable amount.
However, there are also other ways to reduce the inheritance tax burden. For example, you can claim tax-free allowances that are granted to you. These allowances depend on the relationship to the deceased and can significantly reduce inheritance tax.
Furthermore, it is also possible to offset the debts of the deceased directly with the inherited assets. However, this can be more complex and often requires the assistance of an experienced tax advisor to ensure that all tax regulations are correctly followed.
I recommend that you get in touch with an experienced tax advisor to discuss your individual situation and determine the best ways to optimize your tax burden. I am also available for a detailed consultation.
I hope that this information has been helpful to you and I am available for any further questions.
Best regards,
Alwin Widmann
Tax Advisor
