Changes in Inheritance Taxation: Increase in the Inheritance Cost Lump Sum and Tax Deferral for Real Estate

Starting in 2025, significant changes will take effect in Germany’s tax laws regarding both inheritance and property taxation.

1. Increase in the Inheritance Cost Lump Sum

The lump sum for inheritance costs has been increased from €10,300 to €15,000. This change significantly eases the tax burden on heirs, especially in cases of large estates. The increase in the lump sum reduces the overall tax load for heirs.

2. Tax Deferral for Real Estate

A significant new development is the change in rules for deferring the inheritance tax for real estate. According to the new regulation in § 28 Abs. 3 ErbStG, heirs can apply for a deferral of up to 10 years if they cannot pay the inheritance tax except through the sale of the inherited real estate. Previously, this deferral only applied to properties used exclusively for residential purposes, but it now extends to cases where the inherited property is later rented out.

3. New Rules for Property Tax

Additionally, the Federal Fiscal Court (BFH) has ruled that taxpayers have the right to contest the value of their property if it was assessed too high. Specifically, when determining property taxes, taxpayers can now prove that the actual market value of their property is significantly lower than the assessed value if the difference exceeds 40%.

These changes provide significant tax relief for heirs and property owners in Germany, offering new opportunities for financial planning and tax payment.