Selling a house below market value – to family or friends
Anyone who sells a property significantly below market value to family members is, from a tax perspective, giving away part of its value. This can be sensible – but should be well prepared.
The mixed gift
If the purchase price is significantly below the market value, the tax office (Finanzamt) treats the transaction as a partial gift. The difference between the value and the purchase price is subject to gift tax, insofar as it exceeds the tax allowances.
Utilise tax allowances
Gifts to children are tax-free up to 400.000 Euro, to spouses up to 500.000 Euro, and to grandchildren up to 200.000 Euro per donor. The tax allowances apply for a period of ten years each and can be specifically utilised.
Note speculative gains tax
The remunerated part of a sale below market value can be subject to tax within the ten-year speculation period, provided the property was not used by the owner. The gifted part, however, is not treated as a disposal.
Document the value properly
A comprehensible valuation protects against disputes with the tax office and among siblings. We determine the market value free of charge. For tax planning, we recommend advice from tax consultants (Steuerberatung) or a notary's office.