Selling a property in Germany raises a simple but consequential question: will the gain be taxed? The answer depends largely on a single holding period — and on a handful of exceptions that are routinely overlooked in practice.
The General Rule: the Ten-Year Holding Period under § 23 EStG
The sale of a privately held property is treated as a private sale transaction under German income tax law. If more than ten years lie between acquisition and disposal, the gain is fully tax-exempt. If the property is sold within the period, the entire gain is taxed at the individual's personal income tax rate — together, where applicable, with solidarity surcharge and church tax.
The relevant dates are those of the notarised purchase and sale contracts, not the transfer of possession or the entry in the land register. A property acquired in March 2016 may be sold tax-free from April 2026 onwards.
Owner-Occupation: The Most Important Exception
If the property was used exclusively for personal residential purposes in the year of sale and in the two preceding calendar years, the gain is exempt — even within the ten-year period. Continuous owner-occupation spanning three calendar years is generally sufficient.
In practice, the rule is stricter than it first appears. Letting the property in the months before sale — for instance after the owner has moved out — can forfeit the exemption. A holiday home or a second residence used solely for professional purposes does not qualify.
Inheritance and Gifts: The Period Continues to Run
Inheriting or receiving a property as a gift does not start a new holding period. The original acquisition date of the deceased or the donor remains decisive. If a father acquired a property in 2010 and transferred it to his daughter in 2024, she can sell it tax-free immediately — the ten years have already elapsed in the donor's hands.
This rule creates substantial planning opportunities in the context of anticipated succession. It is often considered too late.
The Three-Property Rule: When Private Wealth Becomes a Trade
An individual who sells more than three properties within five years is classified as a commercial property dealer for tax purposes. The consequences are significant: the ten-year rule ceases to apply, gains become subject to both income tax and trade tax, and earlier sales may be reclassified retroactively.
For active real estate investors with larger portfolios, this threshold is a central structuring concern — and a frequent trigger for establishing an asset-managing GmbH or a holding structure.
Calculating the Gain
The taxable gain is the sale price less acquisition and disposal costs. Three points warrant particular attention:
— Notary fees, real estate transfer tax and broker commissions form part of the acquisition cost.— For rented properties, depreciation claimed over the holding period is added back to the gain — it has reduced the property's tax book value over time.— Renovation costs incurred in the first three years that exceed 15 % of the building's acquisition cost must be capitalised and only reduce the gain on sale.
Frequently Asked Questions
Which date counts as acquisition or disposal?The notarised contract date — not the registration in the land register or the transfer of possession.
Does the ten-year rule apply to foreign property as well?Yes. Individuals with unlimited tax liability in Germany are taxed on their worldwide income. A double tax treaty, however, may assign exclusive taxing rights to the country in which the property is located, leaving Germany only the right to apply the progression proviso.
What happens in a forced sale during divorce?A forced sale is treated like any other sale for tax purposes — the ten-year rule continues to apply. Continued personal use by the remaining spouse may still secure the exemption.
Can a loss from sale offset other income?No. Losses from private sale transactions can only be offset against gains of the same type — in the same year, by way of carry-back, or carry-forward.
Your tax situation is individual.
Whether you are planning a sale, structuring anticipated succession, or organising a real estate portfolio — the application of the ten-year rule turns on details that often emerge only on closer review. We advise in German, English, Russian and Italian.
