Tax Savings When Gifting Property: Tips and Strategies
The gifting of properties can bring significant tax burdens, especially when the value of the property exceeds personal exemptions. Here are some concrete tips to reduce your tax liability and contest excessive valuations from the tax office:
1. Use Exemptions
- Degree of Relation: The exemptions vary depending on the degree of relation. For example, the exemption for children and spouses is €400,000, for grandchildren €200,000, and for siblings €20,000.
- Planning: Optimize your use of exemptions by spreading the gifting over several years to minimize tax liabilities.
2. Tax Classes and Rates
- Tax Classes: The tax classes for gift tax are similar to those for inheritance tax. The tax rates vary based on the remaining amount and tax class.
- Example: For children and spouses (Tax Class I), the tax rate ranges from 7% to 30%, depending on the remaining amount.
3. Valuation by the Tax Office
- Valuation Conflicts: If the tax office assigns an inflated valuation, you can contest it by hiring an independent appraiser or filing an objection.
- Documentation: Keep all relevant documents ready to demonstrate the actual value development of the property.
4. Gift in Cash Form
- Cash Assets: If you have cash assets, you can gift these to reduce the value of the property and thus lower your tax burden.
5. Long-term Planning
- Time Division: Spread the gifting over several years to minimize the tax burden per year and to optimize the use of exemptions.
- Ten-Year Deadline: Be aware of the ten-year speculative period to avoid paying speculation tax if you plan to sell the property.
6. Consultation with Professionals
- Tax Consultant: Consult a tax advisor to develop the best strategy for your individual situation and to avoid potential tax liabilities.
By applying these strategies, private investors and savers can effectively reduce the tax burdens associated with gifting properties.