Adjustments to inheritance tax 2023
From 2023 there will be an important change for real estate owners who are valued using the discounted earnings method or the real value method – especially for the heirs.
Specifically, it is about determining the market value. There are currently different methods for doing this. Real estate is often valued using the comparative value method. It is therefore checked what sales prices real estate in the area has achieved. If there are no objects to compare, the material value method is used for single-family houses, for example. This material value procedure is to be adjusted from January 2023.
It is planned to extend the so-called “possible useful life” of houses from 70 to 80 years. This gives the building substance a higher current value because the houses can be lived in or used for longer. The factor by which this value is multiplied should also be changed. So far, the factor has been between 0.9 and 1.1. In the future it should be between 1.3 and 1.5. That makes a significant difference for the heirs, even if it doesn’t sound like much at first.
Then by adjusting the property valuation, the value of the property can increase noticeably. The inherited assets increase as a result, so that the applicable allowance for surviving dependents is more likely to be exhausted – and they have to pay more taxes. In individual cases, the real estate value can even increase by 50 percent. The inheritance tax is then no longer a few thousand euros, but several tens of thousands of euros.
For example, a property with a market value of $400,000 multiplied by 1.0 equals $400,000. The same property multiplied by a factor of 1.5 equals 600,000 euros. This means that an heir with an allowance of 400,000 euros would have to pay taxes on 200,000 euros. Overall, the following applies: The higher a property is valued, the faster the allowances are exhausted.
Hans-Joachim Beck, head of the tax department of the German real estate association IVD, recommends: “Anyone who plans to transfer their house to the next generation by way of anticipated succession should do so and sign the contract this year.”