Capital gains tax on German property: the 10-year rule
Capital gains tax on German property is not a tax of its own in the Income Tax Act. A sale of a privately held apartment can be a private disposal. Whether the gain then falls into income tax depends mainly on the time between purchase and sale, and on whether you lived in the home yourself.
At Sweet Home Berlin we place that holding period inside the buying strategy, before a listing is judged on yield alone. The binding view stays with your tax adviser. We do not replace a law firm.
Current homes: apartments for sale in Berlin.
What the 10-year rule actually says
The rule is section 23 of the German Income Tax Act (EStG). Private disposals of land — and of condominiums — are sales where the period between acquisition and disposal is not more than ten years. If more than ten years lie between those dates, the sale is not a private disposal under that provision.
The statute counts the period. It does not say “about ten years”. Which calendar day is the last day inside the window in your file is a question for tax advice, using the contract dates.
That is separate from the tax you pay on the way in. Berlin transfer tax (Grunderwerbsteuer) is charged on the purchase. The holding-period question appears when you sell later.
When living in the home takes the gain out
Section 23 excludes assets used exclusively as your own home for the whole period between acquisition or completion and sale. The same exclusion applies if the home was used as your own residence in the year of sale and in the two preceding years.
A continuous let does not match that wording. Moving in briefly at the end does not automatically erase an earlier tenancy. The second path in the statute is use in the year of sale and the two years before it. A break in occupation, use by a relative, or a room used for work can change the result. The exposé does not decide that. Your tax adviser does, from the actual use.
How the gain is calculated
Under section 23, gain or loss is the difference between the sale price and the acquisition or production costs, together with income-related expenses. If you let the apartment and deducted depreciation against that rental income, those deductions reduce the acquisition or production cost to the extent they were claimed. Holding period and depreciation belong in one conversation. The landlord-side map is in taxes for landlords in Germany.
Gains stay tax-free if the total gain from private disposals in the calendar year was less than €1,000. That is the line in the statute. Once the year’s total reaches that amount, this sentence no longer keeps the gain tax-free. The law does not tax only the slice above €1,000.
Losses from these transactions may be set off only against gains from private disposals. They are not a general loss pot for other income.
Inheritance, gifts and the clock that keeps running
On an acquisition without payment, section 23 attributes the predecessor’s acquisition to the successor. A gift or inheritance does not restart the ten years. The clock continues from the date the deceased or the donor acquired the property. Anyone selling an inherited apartment needs that earlier date, not only the date on the certificate of inheritance.
Why the holding period belongs in an investment plan
A Berlin property investment is often judged on rent and purchase price. A sale inside ten years can pull the gain into income tax if no exclusion applies. If you hold to let, put the period into the plan before rental yield is the only number on the page.
If the apartment is already tenanted, the lease sits in the same review as the tax clock. See buying a tenanted apartment in Berlin.
What this article does not decide
Sweet Home Berlin explains why the holding period matters at purchase. We do not set your tax rate, we do not test whether repeated buying and selling is a trade, and we do not tell you that a specific sale is tax-free. Repeated deals can fall outside section 23. That is a different case, and it belongs with the adviser who has your figures.
FAQ
When does section 23 stop covering a property sale?
When more than ten years lie between acquisition and disposal. Inside that period the gain can be a private disposal, unless an exclusion applies.
Is it enough to move in before I sell?
The statute names two paths: exclusive use as your own home for the whole period between acquisition or completion and sale, or use as your own home in the year of sale and the two years before it. Whether your timeline fits is for your tax adviser.
Does an inheritance restart the ten years?
No. On a transfer without payment, the predecessor’s acquisition date is the one that counts.
Is this tax advice from Sweet Home Berlin?
No. We connect the holding period to the property decision. The assessment stays with your tax adviser.
Next step with Sweet Home Berlin
If you want the 10-year rule read against a real Berlin apartment, we start with location, price and how you will use the home. The tax detail stays with your adviser.