Tax base

Tax Base - The tax base is the value or amount to which a tax rate is applied in order to calculate the tax owed. In the real estate sector, it is relevant for several types of taxes: For real estate transfer tax, the tax base is the purchase price (Section 8 of the Real Estate Transfer Tax Act); for property tax, it is the property tax value; for income tax, it is income from renting and leasing; and for inheritance and gift tax, it is the real estate value.

Tax Base for Major Real Estate Taxes

• Real Estate Transfer Tax: The tax base is the consideration - typically the purchase price including assumed encumbrances (e.g., mortgages), but excluding separately listed fixtures (built-in kitchen, furniture, awnings). In Bavaria, the tax rate is 3.5%. For a purchase price of 400,000 euros, 14,000 euros in real estate transfer tax is due.
• Property Tax: Since the 2022/2025 reform, property tax has been calculated based on the property tax value, which in Bavaria is determined according to the Bavarian area model (rather than the federal model) using land area, standard land value, building area, and building type. The property tax value is multiplied by the tax assessment rate and the municipal assessment rate. In Nuremberg, the assessment rate for Property Tax B (developed properties) is currently 535%.
• Depreciation: The tax base for building depreciation is the portion of the acquisition costs attributable to the building-the land portion is excluded, as land is not subject to depreciation. A high proportion of the building leads to higher depreciation amounts and thus to a lower tax burden when the property is rented out.
• Inheritance/Gift Tax: For real estate transfers, the property value is determined in accordance with the Valuation Act-typically using the comparative, income, or cost approach. Owner-occupied family homes can be transferred tax-free under certain conditions.

Planning Options

The tax base offers legal opportunities for optimization:

• Inventory Disclosure: If the purchase agreement specifies a separate price for included inventory (built-in kitchen, sauna, awning, garage fixtures), the tax base for real estate transfer tax is reduced by this amount. However, the inventory must be valued realistically-excessive inventory values are scrutinized by the tax office and may not be recognized for tax purposes.
• Purchase price allocation for depreciation: The allocation of the total purchase price between land and building components is crucial for calculating depreciation. A higher building portion leads to higher annual depreciation amounts and thus to a significant tax reduction when the property is rented out. We recommend preparing a purchase price allocation determined by an expert, which the tax office must accept if it is plausibly justified.
• Modernization measures as acquisition-related production costs: Expenses incurred in the first three years after purchase that exceed 15% of the acquisition costs must be capitalized as production costs and depreciated-not immediately deducted as income-related expenses. This provision (Section 6(1)(1a) of the German Income Tax Act (EStG)) must be strictly observed when planning renovation measures after purchase.

Tax Bases for Real Estate Taxes - Overview

Tax Type	Tax Base	Tax Rate (Bavaria)	Legal Basis
Real Estate Transfer Tax	Purchase price (including assumed encumbrances)	3.5%	§ 8 GrEStG
Property Tax B	Property tax value × tax assessment rate	Assessment rate in Nuremberg: 535%	GrStG, BayGrStG
Income Tax (Rental Income)	Surplus of income over income-related expenses	Individual tax rate	§ 21 EStG
Corporate Income Tax (Company)	Taxable income from real estate	15% + Solidarity Surcharge	KStG
Inheritance/Gift Tax	Property value (§§ 176 ff. BewG)	7-50% per tax bracket	ErbStG, BewG
Capital gains tax (Section 23 EStG)	Capital gain (Sale price − Acquisition cost − Expenses)	Individual tax rate	Section 23 EStG
Value-added tax (commercial rental, opted in)	Net rent	19%	Section 9 UStG

Practical tip for property owners in Nuremberg and Franconia

We recommend that buyers in the Nuremberg metropolitan area list separately the included fixtures and fittings in the purchase contract when buying real estate-for a built-in kitchen (approx. 8,000-15,000 euros) or high-quality garden furnishings, the savings on real estate transfer tax can amount to 300-500 euros. For rented properties, the purchase price should be carefully allocated between the land and building components: In Nuremberg, where standard land values in central locations are significantly higher than in outlying areas, the building component varies considerably. A tax advisor can justify a higher building portion through an expert appraisal and optimize the annual depreciation-the tax savings over 20 years can thus amount to several thousand euros.

Frequently Asked Questions

How is the tax base for real estate transfer tax determined?

The tax base is generally the purchase price agreed upon in the notarized purchase agreement, including all payments assumed by the buyer (e.g., buyout payments for furnishings or rights of use, assumed land charges). The following are not included: separately listed inventory, real estate agent commissions, and notary fees. In the case of transfers without consideration (gifts, inheritances), the tax office determines the property value as the tax base in accordance with the Valuation Act.

Can I challenge the tax base for property tax?

Yes, an appeal may be filed against the tax office’s property tax assessment notice within one month if the determined value appears too high. Common reasons include incorrect property details, incorrect standard land values, or unaccounted-for value-reducing circumstances (noise pollution, contaminated sites, limited usability). Anyone wishing to base their appeal on a market value that is below the value determined under valuation law may submit an independent appraisal-the Federal Constitutional Court made this evidence admissible in its 2018 property tax ruling.

What role does the tax base play in inheritance tax?

When real estate is inherited, the property value under the Valuation Act is used as the tax base. In many cases, this is close to the market value or may even exceed it if no value-reducing factors are taken into account. Owner-occupied residential properties can be inherited completely tax-free under certain conditions (Section 13(1)(4b) of the Income Tax Act: family home exemption) if the heir moves in and lives there for ten years. Rented residential properties receive a 10% discount on the property value.

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