Modification of the valuation regulation for real estate assets regarding inheritance and gift tax

The Bundestag has modified the valuation law for the tax evaluation of real estate (Bewertungsgesetz) with effect from 01.01.2023. This affects the amount of inheritance and gift tax.

Changes in the calculation of inheritance and gift tax

The tax office determines the value of a property using the comparative value method (Vergleichswertverfahren), the net income value method (Ertragswertverfahren) or the asset value method (Sachwertverfahren). The changes particularly affect the net income value method and the asset value method.

The asset value method is mostly used for owner-occupied residential property and one- or two-family houses. In this procedure, the value multiplicators are increased and regional factors are introduced. The total useful life of residential property is also increased from 70 to 80 years.

The multiplicators (Wertzahlen or Sachwertfaktor) were raised by 30 percent. The result is higher values. While the value figure for one- and two-family houses and flats was 0.5 to 1.5 until 2023, it is now 0.8 to 1.8.

The net income value method is mostly used for rented properties. Since the beginning of January, the management costs are no longer determined on the basis of a percentage of the annual property, but on the basis of various factors such as the number of square metres, the gross income with a breakdown by management and maintenance costs as well as the so-called risk of loss of rent.

The property interest rates were reduced by approx. 30 percent. This leads to higher values since the land value interest is a deductible item.

Taxpayers can continue to prove to the tax office that the market value of the property is lower with the help of an independent expert report.

The tax allowances remain unchanged

Please note that in most cases the changes result in an increased value of the property. Consequently, inheritance and gift taxes also increase, which means that the tax allowances are exhausted more quickly.

The tax allowances remain unchanged at 500,000 euros for spouses, 400,000 euros for children or stepchildren and 200,000 euros for grandchildren. Other relatives and other persons only have a tax allowance of 20,000 euros.

Although there are many demands for an increase in the tax allowance, such an increase is not foreseeable in the near future.

You can use up the tax allowance every ten years. By transferring assets in different steps early on, heirs can save a great deal of tax and, in the best case, will not have to pay any tax at all. Early estate planning always pays off. It provides security, peace of mind and – very importantly – tax savings.

We will be happy to advise you and your family on your estate and find the best and most cost-effective solution. We will also be happy to discuss any particularities in an international context. Our international team looks forward to your contact request in English, auf Deutsch ou en Français.


Katharina Kutter

As an attorney for family and inheritance law and have specialised in advising companies and high net worth individuals in the areas of asset succession, asset division, tax law and family law retirement planning – with a particular focus on cross-border matters. 

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