Spousal swing: utilising tax advantages for property owners

The spousal swing is a tax strategy that allows property owners to take advantage of tax benefits by transferring property between spouses. It is often used to reduce the tax burden and maximise depreciation opportunities. But what are the challenges and pitfalls involved? The most important aspects and steps of the spousal swing and the relevant tax benefits are explained below.

What is the spouse swing?

The spousal swing is the targeted transfer of a property between spouses in order to achieve tax advantages. The property is usually sold to the other spouse at a fair market price, creating new depreciation opportunities. This strategy is particularly attractive if a property has increased in value and new tax depreciation potential is to be utilised.

Relevant challenges and tax hurdles

Although the spousal swing can offer attractive tax advantages, there are also challenges to consider:

• Standard market purchase price: The sale must be made at a fair market price for the tax office to accept the transaction. If the purchase price is too low, it may be considered a gratuitous transfer, as a result of which the amortisation options may no longer apply.
• Financial aspects: An actual purchase price must be paid, which makes it necessary to finance the transaction, even if the parties are spouses.
• Speculation period: In order to enable a tax-free sale to a spouse, the speculation period of ten years must be observed.

Tax advantages of the spousal swing

The spousal swing offers various tax advantages that are particularly attractive for property owners:

Reassessment of depreciation and amortisation

The sale of a property to a spouse creates a new depreciation base. This means that the buyer can depreciate the property on the basis of the new purchase price. As property in Germany is depreciated on a straight-line basis over a period of 50 years (2 % per year for residential property), a higher tax base can lead to significant tax benefits.

Optimisation of the tax burden

If the spouse to whom the property is sold has a lower income or can make better use of other tax deductions, the tax burden in the household is optimised. The spousal swing can thus lead to a more efficient distribution of taxes between the spouses.

Sale to the spouse after 10 years: Utilise tax advantages

Another aspect is the tax-free sale of a property after the so-called speculation period of 10 years has expired. In Germany, profits from the sale of property that has been owned by the owner for more than 10 years are tax-free. This opens up the possibility of utilising tax advantages by selling to a spouse.

This is how the tax-free sale to the spouse works:

• Observe the speculation period: In order to benefit from the tax exemption, the property must have been owned by the owner for at least 10 years. Only then is a tax-free sale possible.
• Transfer to the spouse: At the end of the 10-year period, the property can be sold to the spouse at a fair market price without incurring tax on the capital gain.
• Recapitalisation of depreciation and amortisation: The buyer can depreciate the property for tax purposes as if he had bought it new, which leads to higher annual depreciation amounts.

Tips for using the spouse swing

• Advice from experts: Due to the tax complexity, it is advisable to consult a tax advisor or expert from the network of my-home.de who can determine the best course of action for your situation.
• Documentation of the sale: Make sure that the sale is properly documented in order to be able to answer any queries from the tax office.
• Check financing options: Clarify how the purchase price can be financed. In some cases, debt rescheduling may also make sense.

Seek expert advice

If you are planning to transfer a property to your spouse, you should seek comprehensive advice. The experts from the network of my-home.de help you to make the most of the tax benefits and avoid pitfalls. Arrange a non-binding consultation to discuss your individual situation.

Important points summarised

The spousal swing offers property owners an interesting opportunity to utilise tax advantages through the transfer of property between spouses. By selling to a spouse after the speculation period has expired, additional tax benefits can be realised and depreciation can be reassessed. However, it is important to plan all transactions carefully and seek expert advice where necessary to maximise the benefits.

Q&A: Frequently asked questions about the spouse swing