At what amount are private sales transactions taxable?
If you make a profit from private sales transactions, you only need to pay tax on it if it exceeds 600 Euro, as there is a corresponding allowance up to this amount. Since no tax allowance is granted here, if you make a profit of 600 Euro or more, you must pay tax on the entire amount, not just the portion exceeding the allowance.
The capital gain is included in the taxable income and is then taxed at the personal tax rate. The withholding tax does not apply here.
Losses from sales transactions may only be offset against profits of the same category.
In the case of jointly assessed spouses, each partner is entitled to the allowance. An unused allowance cannot be transferred to the spouse.
(2023): At what amount are private sales transactions taxable?
When is the sale of a property a private disposal transaction?
The sale of a property can be considered a private sale transaction. The key factors are the use of the property and the timing of the sale.
If you sell a property within ten years of purchase, you must pay tax on the profit from the sale at your personal tax rate. However, this does not apply if you have used the property for your own residential purposes. In this case, you can sell the property without the profit being taxed.
Exceptions to the tax liability apply to owner-occupied properties (§ 23 para. 1 sentence 1 no. 1 sentence 3 EStG). There are two cases ("alternatives") to distinguish:
Alternative 1: The property was used continuously for own residential purposes from the time of purchase or completion until the sale.
Alternative 2: The property was used for own residential purposes in the year of sale and the two previous years. It is not necessary for this period to cover three full calendar years.
The Federal Fiscal Court has ruled that the 2nd alternative - unlike the 1st alternative - does not require exclusive own use. The duration of own use in the first and third year is not relevant. Only in the second year must the own use have been continuous. Therefore, short-term own use before the sale of a long-term owner-occupied flat is not detrimental (judgment of 3.9.2019, IX R 10/19).
The case: The claimant purchased a flat in 2006, which he used continuously for his own residential purposes until April 2014 and sold again with a notarised purchase contract dated 17.12.2014. From May 2014 - when he moved out - until the sale in December 2014, the claimant rented the flat to third parties. The tax office calculated a taxable capital gain of 44,338 Euro. The claimant objected to this. In his view, the sale was not taxable because he had used the flat for his own residential purposes in the year of sale and in the two preceding years (2nd alternative). The action against this was successful; the Federal Fiscal Court dismissed the tax office's appeal.
Reasoning: The 2nd alternative requires that the flat is used for own residential purposes in the year of sale and in the two preceding years. The use for own residential purposes in the year of sale and in the second year before the sale does not have to have been for the entire calendar year; rather, a continuous period of use for own residential purposes is sufficient, extending over three calendar years without fully covering them - except for the first year before the sale ("middle calendar year").
This means: A continuous use of one year and two days is sufficient for the application of the exemption provision - whereby the use for own residential purposes must cover the entire middle calendar year, while the own residential use in the second year before the sale and in the year of sale only needs to cover one day each.
Property sales: In principle, the sale of a property as a private sale transaction is subject to tax if it takes place within ten years of purchase (§ 23 para. 1 no. 1 EStG). However, there are exceptions: The capital gain is tax-free if the property was used continuously for own residential purposes between purchase or completion and sale, or in the year of sale and the two preceding years.
Profit from home office and home: The Federal Fiscal Court has ruled that the profit attributable to the home office from the sale of the home is not subject to speculative tax if one of the exemption provisions for the home listed below applies. This rule applies even if expenses for the home office were previously claimed (BFH judgment of 1.3.2021, IX R 27/19).
Use of home after separation: But what happens if spouses separate, one moves out and the home owned by them is used free of charge by the other (ex-)spouse or a child until the property is sold? Does this still count as "use for own residential purposes" so that the sale of the home within the ten-year period remains tax-free? The Münster Finance Court has ruled that a free transfer to the ex-spouse is not considered "use for own residential purposes" (FG Münster of 19.5.2022, 8 K 19/20 E).
Sale of co-ownership shares after divorce: In another case, the Federal Fiscal Court ruled that a divorced spouse who sells their co-ownership share in a jointly owned family home to the former spouse as part of the asset division in the divorce proceedings may be subject to tax (BFH judgment of 14.2.2023, IX R 11/21).
The case: In 2008, the couple jointly purchased a family home, which they initially lived in with their child. After marital problems, the husband moved out in 2015. The wife remained in the house with the child. The marriage was later dissolved. During the asset division in the divorce proceedings, a dispute arose between the separated spouses regarding the property. When the wife threatened to auction it, the husband sold his half co-ownership share to the wife in 2017. She continued to use the property as living space for herself and the child.
Tax consequences: The tax office subjected the profit from the sale of the co-ownership share to income tax. The Federal Fiscal Court confirmed that it was a taxable private sale transaction. This is the case if a property is sold within ten years of purchase. This also applies to a half co-ownership share transferred from one spouse to the other as part of the asset division after a divorce. However, a sale is not taxable if the property was continuously used by the owner and their family members for residential purposes in the years between purchase and sale or in the year of sale and the two previous years. A divorced spouse no longer uses the property in which they have co-ownership for residential purposes if they have moved out and only their divorced spouse and the child live there.
(2023): When is the sale of a property a private disposal transaction?
How do I calculate the capital gain or loss?
A profit or loss from a sale transaction is, according to Section 23 of the Income Tax Act, the difference between the sale price on the one hand and the acquisition or production costs and advertising costs on the other.
Acquisition costs include the pure purchase price and ancillary acquisition costs. The acquisition or production costs are reduced by depreciation for wear and tear (AfA), increased depreciation and special depreciation, insofar as they have been deducted in the determination of income. Ultimately, the deducted AfA is reversed.
Ancillary costs include, for example, consultancy fees, purchase fees, telephone charges or travel expenses, but they must all have been incurred in connection with the acquisition. Advertising costs must be apportioned if they are also related to other income.
(2023): How do I calculate the capital gain or loss?
Holiday apartment: Is the sale taxable even if used privately?
If you sell your holiday home or apartment, you may have to pay tax on the profit in certain cases. As a rule, the sale of a property is tax-free after 10 years. However, if the period between purchase and sale is not more than 10 years, it is considered a private sale transaction. An exception applies if the property was used exclusively for your own residential purposes during the period between purchase or completion and sale, or in the year of sale and the two preceding years (§ 23 para. 1 no. 1 sentence 3 EStG).
According to the tax authorities, the sale of a holiday apartment or weekend house within the 10-year speculation period is also tax-free if you used the property exclusively for your own residential purposes from the time of purchase or completion until the time of sale, or in the year of sale and the two previous years.
It is even harmless if the property is unoccupied outside of your own use. It is considered "for own residential purposes" even if it is only occupied occasionally, as long as it is available to you as a residence during the rest of the time (BMF letter dated 5.10.2000, BStBl. 2000 I p. 1383, para. 22).
The Cologne Tax Court ruled against the tax authorities, stating that "own use" of a holiday apartment is not applicable if it is mainly used for holiday stays. If such a holiday apartment is sold before 10 years have passed, it is considered a private sale transaction, and the profit is taxable as "other income" according to § 22 no. 2 EStG (Cologne Tax Court, 18.10.2016, 8 K 3825/11, appeal IX R 37/16).
Fortunately, the Federal Fiscal Court overturned this decision and ruled as follows: A building is also used for own residential purposes if the taxpayer only occupies it temporarily, provided it is available to them as a residence during the rest of the time. Therefore, second homes, holiday homes not intended for rental, and homes used as part of a second household can also fall under § 23 para. 1 sentence 1 no. 1 sentence 3 EStG (BFH v. 27.06.2017, IX R 37/16 BStBl 2017 II p. 1192).
The Münster Tax Court recently ruled that even if the profit from the sale of a holiday apartment is taxable, the inventory sold with it is not included. This means it is not part of the speculative profit (judgment of 3.8.2020, 5 K 2493/18 E).
(2023): Holiday apartment: Is the sale taxable even if used privately?
