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Speculation tax: The cost trap in divorce

In Germany, private property owners rarely have to pay taxes on the sale of their property. This particularly affects divorced couples who have only just purchased their property together. Anyone who has not lived in their newly purchased property for long enough may have to pay speculation tax.

What is speculation tax?

Speculation tax is also known as capital gains tax and is mainly aimed at investors who buy real estate and quickly resell it at a profit. Roughly speaking, the tax is levied on the difference between the purchase price paid and the price at which the property was later resold. Speculation tax is subject to a ten-year period. This means that anyone who owns the property for longer than ten years does not have to pay speculation tax. There is an exception for properties used for personal use. In this case, owners only have to have lived in the property in the year of sale and in the two preceding years. The amount of speculation tax depends on the seller's personal tax rate.

If the sale price is ultimately lower than the price at which the property was originally purchased, no speculation tax is payable.

What do divorced couples need to bear in mind in order to avoid paying speculation tax?

At first glance, one might think that only divorced couples who have not lived in the newly purchased property themselves for the last three years are affected by speculation tax. However, one of the two partners may also be liable for speculation tax if they have lived in the property for more than three years in total but moved out in the year before the house was sold and therefore do not meet the conditions for tax exemption.

The situation can also become problematic if one partner is the sole owner of the property and moves out after the separation. In this case, the same applies: if they did not live in the property in the year prior to the divorce, speculation tax is payable. Of course, this only applies if the property has been in his possession for less than ten years.

For couples who have not lived in the property long enough, it is therefore often advisable to wait before selling. However, if the war of the roses is raging, it is hardly possible for most couples to continue living under the same roof. If the property is jointly owned and only one partner moves out, only that partner has to pay speculation tax on the sale.

If one partner has already moved out, it often makes sense for them to complete the sale in the same year in order to save on capital gains tax. To ensure that everything runs smoothly, the sale must be well prepared. With a professional real estate agent, the chances of success are highest. To find the best solution and save on taxes, it is advisable to discuss this issue with a tax advisor.

Are you considering selling your divorce property and need a competent real estate agent? Contact us now. We will be happy to advise you. Legal notice: This article does not constitute tax or legal advice in individual cases. Please have the facts of your specific case clarified by a lawyer and/or tax advisor.

Photo: Elnur_ / Depositphotos.com

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