At what amount are private sales transactions taxable?
At what amount are private sales transactions taxable?
Private sales transactions are taxable if the profit generated is 1,000 Euro or more. For profits up to 1,000 Euro, there is an exemption limit, meaning you do not have to pay tax on them. However, if the profits exceed 1,000 Euro, the entire profit becomes taxable – not just the amount exceeding the exemption limit.
Taxation of capital gains
The capital gain is added to the taxable income and taxed at the personal tax rate. Unlike capital income, the withholding tax does not apply here; instead, regular income tax is applied.
Offsetting losses
Losses from private sales transactions may only be offset against profits from similar sales transactions. Offsetting against other types of income is not possible.
Exemption limit for spouses
For jointly assessed spouses, each partner is entitled to the exemption limit of 1,000 Euro individually. However, an unused exemption limit cannot be transferred to the spouse.
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 if the property is sold within ten years of purchase. In this case, you must tax the profit from the sale at your personal tax rate. However, this does not apply if the property was used for own residential purposes. In such cases, the sale is tax-free.
Exceptions to tax liability for own use
The Income Tax Act (§ 23 para. 1 sentence 1 no. 1 EStG) provides two exceptions for owner-occupied properties:
1. Alternative 1
The property was used continuously for own residential purposes between purchase and sale. In this case, the profit from the sale is tax-free.
2. Alternative 2
The property was used for own residential purposes in the year of sale and the two preceding years. It is not necessary for the use to cover three full calendar years. It is sufficient if the own use was continuous in the second year before the sale, while short-term own use is sufficient in the first and last year.
Example for the 2nd alternative
The Federal Fiscal Court has ruled that for the second alternative, continuous use over three calendar years is sufficient, even if the own use in two of these years was only short-term (BFH ruling of 3.9.2019, IX R 10/19). A continuous period of one year and two days can therefore be sufficient, provided the middle year was fully used for residential purposes.
Special features for sales within the family or in the event of divorce
- Sale of co-ownership shares after divorce: If a co-ownership share is sold to the former spouse after the divorce, this sale may be taxable if the property is sold within ten years of purchase and the seller no longer uses the property for own residential purposes (BFH ruling of 14.2.2023, IX R 11/21).
- Use by ex-partner or children: If a spouse moves out after separation and the home is used free of charge by the ex-partner or a child, this does not count as own residential use by the spouse who moved out. The sale may therefore be taxable (FG Münster, ruling of 19.5.2022, 8 K 19/20 E).
Profit from home office and home
The profit share of the home office also remains tax-free if one of the above exceptions applies to the entire home. This rule applies even if advertising costs for the home office were previously claimed (BFH ruling of 1.3.2021, IX R 27/19).
Conclusion
The sale of a property is generally taxable if it takes place within ten years of purchase. However, an important exception exists if the property was used continuously or in the year of sale and the two preceding years for own residential purposes. In such cases, the profit from the sale is tax-free. There are also tax peculiarities to consider in special situations such as sales after a divorce or the use of a home office.
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 is, according to § 23 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 determining 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.
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. The basic rule is: property sales are 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 between the purchase or completion and the 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 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 for a holiday apartment, "own use" 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 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 the 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).
Recently, the Münster Tax Court 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).
Holiday apartment: Is the sale taxable even if used privately?
