German capital gains tax on property: the ten-year rule

The rule in the statute

Section 23(1) EStG treats as taxable “private sales transactions” the sale of land, and of rights treated like land, such as a heritable building right (Erbbaurecht), where the period between Anschaffung (acquisition) and Veräußerung (sale) is not more than ten years. Buildings and outdoor works are included where they are built, extended or enlarged within that period; this extends to parts of a building that are independent assets and to condominium flats.

The words “not more than ten years” mean a sale after more than ten years is outside the rule. The statute does not define the two dates inside section 23 itself, so what counts as acquisition or sale in a given case is a point for a tax adviser. If you inherited or received the home as a gift, the acquisition date of the person you received it from is attributed to you (section 23(1) sentence 3); see the guide on selling an inherited home.

The own-use exception

The ten-year rule does not apply to an asset that, between purchase or completion and sale, was used exclusively for your own residential purposes, or that was used for your own residential purposes in the year of sale and the two years before (section 23(1) sentence 1 no. 1, last sentence). Two points follow from the wording:

• The first branch requires exclusive own use for the whole period from purchase (or completion) to sale. The second branch looks only at three years: the year of the sale and the two before it. On the wording, a home used as your own for those three years falls under the exception even if it was used differently earlier.
• The statute speaks of use zu eigenen Wohnzwecken (for your own residential purposes). How that applies to a relative living there, a second home or a vacant period is not spelled out in section 23 and is for a tax adviser or the tax office.

How the gain is calculated

Section 23(3) EStG: gain or loss is the sale price minus acquisition or production costs, minus income-related expenses (Werbungskosten). Where depreciation (Absetzung für Abnutzung), increased depreciation or special depreciation was deducted against rental or similar income, the acquisition or production costs are reduced by those amounts. The statute does not provide a flat-rate cost figure, so a formula is all that can be written here:

gain = sale price − (acquisition or production costs − depreciation already claimed) − selling expenses

The €1,000 threshold and losses

Gains stay tax-free if the total gain from private sales in the calendar year was less than €1,000. At €1,000 or more, the whole gain is taxable, not only the excess.

Losses are restricted. Under section 23(3), a loss may be offset only against gains from private sales in the same calendar year, and it may not be deducted under the general loss-carry rules of section 10d. It reduces, under section 10d, the income from private sales of the immediately preceding year or of later years.

The rate

The gain counts as income and is taxed with your other income under the progressive tariff of section 32a EStG. For assessment year 2026, tax is zero up to a taxable income of €12,348 (Grundfreibetrag), then rises along formulas; the marginal rate is 42% from €69,879 to €277,825 and 45% above that. Spouses assessed jointly are taxed with the splitting method: twice the tax on half their joint income (section 32a(5)). Surcharges and church tax are not covered in this guide.

If you live abroad

Section 49(1) EStG lists the German-source income of persons with limited tax liability (beschränkte Steuerpflicht, section 1(4)). Item 8 of that list lists the gain on private sales of domestic land among them, so a non-resident who sells a German property within the ten years is liable to German tax on the gain. Section 1(1) EStG makes a person unlimited-taxable if he has a home or habitual residence in Germany, which affects how the rest of your income is treated. Relief under a tax treaty is a separate question: see the guides on the UK, US and Canada treaties, and the guide on selling as a non-resident.

Which professional to consult

A tax adviser or Steuerberater works out the gain and the own-use test; Payotte does not list tax advisers. A property valuer can document values (see the valuer page). A notary records the sale but does not advise on tax (see the notary page).