Speculation tax

Speculation Tax - The speculation tax is an income tax levied on profits from the sale of private real estate that is sold within the statutory speculation period of ten years following acquisition. It is calculated based on the individual’s income tax rate and is governed by Section 23 of the Income Tax Act (EStG).

What exactly does capital gains tax mean?

Anyone who purchases a property and resells it at a profit within ten years engages in what is known as a private sale transaction under Section 23(1)(1) of the Income Tax Act (EStG). The profit realized in this transaction-that is, the difference between the sale price and the original purchase price, minus incidental acquisition costs, selling costs, and any depreciation taken-is subject to income tax at the individual’s personal tax rate. There is no separate tax rate; the profit is added to the individual’s other income.

The speculation period begins on the date the purchase agreement is notarized and ends exactly ten years later. If the property is sold only after this period has expired, the entire capital gain remains tax-free-regardless of its amount.

The owner-occupancy exemption is particularly relevant: If the property was used exclusively for personal residential purposes in the year of sale and in the two preceding calendar years, the capital gains tax is waived entirely-even if the ten-year period has not yet expired. It is sufficient if the owner-occupancy occurred only partially (i.e., not for the entire calendar year) in the first and third years.

However, this exemption does not apply to rented properties, vacation homes, or commercially used real estate. Furthermore, anyone who sells more than three properties within five years risks being classified as a commercial real estate dealer-with significant tax consequences, including liability for trade tax and sales tax.

Calculation of the Speculation Tax

The taxable capital gain is calculated using the following formula:

Capital gain = Sale price − Acquisition costs − Incidental acquisition costs − Disposal costs − Depreciation (AfA)

Incidental acquisition costs include, among other things, real estate transfer tax, notary fees, land registry fees, and real estate agent commissions at the time of purchase. Selling costs include, for example, real estate agent commissions at the time of sale, prepayment penalties, and costs for appraisals. The calculated profit is then taxed at the individual income tax rate, which ranges from 14% to 45% in Germany. In addition, the solidarity surcharge and church tax may apply.

A calculation example: An apartment in Nuremberg was purchased in 2018 for 250,000 euros (incidental costs: 25,000 euros) and is sold in 2025 for 340,000 euros (disposal costs: 12,000 euros). The capital gain amounts to 53,000 euros. With a personal tax rate of 35%, this results in a tax burden of approximately 18,550 euros. If the property had been sold in 2028-after the ten-year period had expired-no tax would have been owed.

For rented properties, previously claimed depreciation must be added back to the capital gain-this so-called depreciation recapture increases the taxable gain, a fact that is often underestimated. A preliminary tax calculation is therefore recommended in every case.

Practical Tip for Property Owners in Nuremberg and Franconia

Real estate prices have risen significantly in recent years, particularly in the Nuremberg metropolitan area-neighborhoods such as Gostenhof, St. Johannis, and Erlenstegen have seen double-digit increases in value in some cases. This makes the capital gains tax a particularly relevant issue for owners considering a sale before the ten-year period expires.

Our network of experts recommends seeking tax advice before any sale within the speculation period. In many cases, the tax burden can be completely avoided through strategic timing-for example, by using the property for personal residence during the last two calendar years prior to the sale. Anyone who owns a rented apartment in Nuremberg and is thinking about selling should also check whether moving in personally makes tax sense. We are happy to put you in touch with specialized tax advisors in the region.

Frequently Asked Questions

When is the capital gains tax waived for owner-occupancy?

The capital gains tax does not apply if the property was used exclusively for the owner’s own residential purposes in the year of sale and in the two preceding calendar years. In this context, the use in the first and last calendar year does not have to cover the entire year-even one day of personal use at the beginning or end of the year is sufficient. However, this rule applies only to a property that is actually the owner’s primary residence, not to second homes or vacation homes.

How much is the capital gains tax on real estate?

The amount depends on the seller’s personal income tax rate, as the capital gain is added to regular income. The tax rate thus ranges from 14% to 45%, plus the solidarity surcharge and, if applicable, church tax. For example, with a capital gain of 80,000 euros and a marginal tax rate of 42%, the tax burden amounts to approximately 33,600 euros plus ancillary charges. Early planning can significantly reduce or even eliminate this burden.

Does the ten-year period also apply to inherited real estate?

For inherited real estate, the decedent’s period of ownership is credited to the heir. Thus, if the decedent acquired the property more than ten years ago, the heir can sell it immediately tax-free-regardless of when the inheritance took effect. This rule is particularly significant for communities of heirs in the Franconia region, as it allows for a prompt sale without tax disadvantages. In the case of gifts, however, no new period begins; the recipient assumes the original holding period of the donor.

What is considered commercial real estate trading, and when does this risk arise?

Anyone who buys and sells more than three properties within five years risks being classified by the tax office as a commercial real estate trader. The consequences are significant: All profits are subject not only to income tax but also to trade tax. In addition, previous tax-exempt sales may be retroactively classified as commercial, which can lead to substantial back taxes. However, the three-property limit is not a rigid rule-even fewer than three sales can be considered commercial trading under certain circumstances, such as when there is a close temporal connection between the purchase and sale, or when the owner acquired the properties specifically for resale. For property owners in the Nuremberg metropolitan area who own multiple properties and sell them occasionally, forward-looking tax planning is essential to avoid unintentionally exceeding this limit.

Back to the Real Estate Glossary.