Capital Gains on German Real Estate: When Is the Sale Taxable — and When Not?

Last updated: July 2026 · Giulia Uggias-Sproß, German Tax Advisor (Steuerberaterin, M.A. Taxation)

Anyone selling a property faces one simple but consequential question: is the gain taxable? In Germany the answer hinges largely on a single deadline — and on a handful of exceptions that are regularly overlooked in practice.

In brief

• More than 10 years between purchase and sale → the gain is entirely tax-free (§ 23 EStG)
• Less than that → the entire gain is subject to your personal income tax rate
• The dates of the notarial purchase contract are decisive — not the transfer of possession or the land register entry
• Owner-occupation in the year of sale and the two preceding years makes the sale tax-free even within the ten-year period
• With inheritance and gifts, the previous owner's period continues — it does not start afresh
• More than three properties in five years → commercial property trading, and the ten-year rule no longer applies

How does the ten-year rule under § 23 EStG work?

Selling a property held as private assets counts for tax purposes as a private disposal transaction.

• More than ten years between acquisition and sale: the gain is entirely tax-free.
• Below that threshold: the entire gain is subject to your personal income tax rate — for higher incomes including solidarity surcharge and, where applicable, church tax.

The dates of the notarial purchase contract are decisive, not the transfer of possession, benefits and burdens. Example: a property acquired in March 2016 can be sold tax-free from April 2026.

When does the owner-occupation exception apply?

If the property was used exclusively for your own residential purposes in the year of sale and in the two preceding calendar years, no tax arises — even within the ten-year period. Continuous owner-occupation spanning three calendar years is sufficient.

In practice this rule is stricter than it sounds:

• Letting the property in the final months before the sale — for instance after moving out — can cost you the exemption.
• A holiday property does not meet the requirement.
• Nor does a second home used exclusively for professional purposes.

What applies to inherited or gifted property?

Inheriting or receiving a property as a gift does not start a new period. What matters is the original acquisition date of the deceased or the donor.

Example: if the father acquired the property in 2010 and transferred it to his daughter in 2024, she can sell tax-free from 2020 onwards — the ten years had already elapsed at the donor's level.

This rule opens considerable planning scope in the context of anticipated succession. In practice it is frequently considered too late.

What is the three-property threshold — and when do private assets become a trade?

Anyone selling more than three properties within five years is treated for tax purposes as a commercial property trader. The consequences:

• The ten-year rule becomes inapplicable.
• Gains are fully subject to income tax and trade tax.
• Even earlier sales can be requalified retroactively.

For active investors with a larger portfolio this threshold is a central structuring issue — and a frequent reason for setting up an asset-managing GmbH or holding structure.

How is the taxable gain calculated?

The gain is the sale price less acquisition and disposal costs. Three points deserve particular attention:

• Notary fees, real estate transfer tax and agent commissions increase the acquisition costs.
• For let properties, the depreciation claimed is added back to the gain — it reduced the tax book value over the years.
• Acquisition-related production costs within the first three years (exceeding 15 % of the building acquisition costs) must be capitalised and reduce the gain only on sale.

Frequently asked questions

What counts as the acquisition and disposal date?

In each case the date of the notarial contract — not the day of the land register entry or the transfer of possession.

Does the ten-year rule also apply to foreign property?

Yes, the worldwide income principle applies to persons with unlimited tax liability in Germany. A double taxation treaty may, however, assign taxation to the state where the property is located, leaving Germany only a progression proviso.

What happens in a divorce with a forced sale?

The sale is treated for tax purposes like an ordinary sale — the ten-year rule remains applicable. Owner-occupation by the remaining spouse can lead to tax exemption.

Does a loss on sale reduce other income?

No. Losses from private disposal transactions can only be offset against gains of the same kind — in the same year, by carry-back or by carry-forward.

Your tax situation is individual

Whether a planned sale, anticipated succession or structuring a property portfolio — applying the ten-year rule depends on details that often only become visible on close examination. We advise in German, English, Russian and Italian.