Anyone who sells a property privately must normally pay tax on the resulting profit as income, unless the property has been in their possession for at least ten years. However, there are exceptions to this rule. What you need to consider if you want to sell your house after two years and how you can deal with taxes incurred in the process, you can find out here.
The most important facts in brief
- If a property is sold already two years after its acquisition, private sellers have to pay income tax on the gain.
- Income tax is not levied if the seller has used the property himself.
- A profit of up to 600 euros is tax-free.
- The profit from the sale of the property must be declared in the income tax return.
- If more than three properties are sold two years after acquisition, this may be considered commercial real estate trading.
- A good real estate agent will achieve a good sales price for you.
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1. When do I have to pay income tax on the sale profit?
If a property is sold privately, private sellers are exempt from taxation under the Income Tax Act (EStG) – provided that the sale takes place later than ten years after acquisition. The basis for this is the § 23 EStG, which deals with private expression transactions.
The so-called ten-year period begins with the date of purchase specified in the original purchase contract and ends with the date of change of ownership specified in the new purchase contract. If the sale of a property takes place before the ten-year period has expired, regular income taxes on the profit must be paid to the tax office.
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2. When no taxes have to be paid on a house sale after two years
However, within the ten-year period, there are exceptions where income tax is not due on the sale proceeds. If, for example, a house is used between the purchase and the sale itself by the seller or his children for residential purposes If the property has been used for a long time, no taxes have to be paid on the proceeds – even if it is resold after only two years. This rule does not only apply to the main residence, but it are exempt from taxation also:
- Second homes
- Vacation properties
- Houses or apartments that are occupied on the basis of dual household management
For undeveloped land, on the other hand, the tax exemption Not are eligible for taxation, as they cannot be used for residential purposes within the meaning of the law. If a house is sold two years after its purchase, which was rented out between purchase and sale, income taxes must be paid on the profit, however. The Income Tax Act provides for an exemption limit of 600 euros. Profits that are below this limit do not have to be taxed in principle.
- Good sale price!
A good broker will achieve a good sales price for you.
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A good broker checks the creditworthiness of potential buyers early on.
- Time saving!
A good real estate agent sells your property faster.
3. Three-object limit when selling a house after two years
The so-called three-object limit also plays a role in the sale of a house: If more than three properties are sold within five years of their acquisition, the legislator initially assumes that the property is being traded commercially and the seller must pay trade tax and turnover tax of 19 percent to the tax office.
4. The amount of income taxes on the private sale of real estate
The amount of taxes depends on the total income in the assessment year. In addition, the tax burden is reduced by all expenses that are related to the sale of the house. This can be, for example Costs for a real estate agent and the notary as well as expenses for advertisements and travel expenses to viewing appointments act.
The proceeds from the sale of the property and the costs are reported in the income tax return in the annex SO (other income). According to the so-called inflow principle, the assessment year is the year in which the seller received the amount of money for the property. In case of an agreed installment payment over several years, the tax burden is also spread over several years. This can be advantageous because the seller can then take advantage of the exemption limit applicable to each year. It can also make sense to postpone the capital gain to a calendar year in which lower other income is expected.
ExampleA private real estate owner sells his house one year before he retires. In the year of the sale there is still income from dependent work. However, the income in the following year will be lower due to the loss of the previous salary and the receipt of the pension. If the capital gain is received only then on the account of the seller, the total income and thus the tax burden are lower.