Capital Gains Tax (Spekulationssteuer)
Tax on property sale profits (only before 10 years)
Capital gains tax (Spekulationssteuer) in Germany only applies if you sell an investment property within 10 years of purchase. After 10 years, all profits are completely tax-free—one of the best investment incentives in German tax law.
The 10-Year Rule (Spekulationsfrist)
Germany has a holding period requirement for tax-free property sales:
- Before 10 years: Capital gains taxed at 26.375% (without church tax)
- After 10 years: Completely tax-free, no matter the gain
Real Example: The Cost of Selling Early
Property Sold After 8 Years:
- Purchase price (8 years ago):€450,000
- Sale price today:€600,000
- Capital gain:€150,000
- Capital gains tax (26.375%):−€39,563
- Net gain after tax:€110,437
If you had waited 2 more years (10 years total), you'd keep the full €150,000.
What Counts as a Capital Gain?
The taxable gain is calculated as:
- Deductible costs: Notary fees, broker commission (if you paid), renovations that increased value
- Not deductible: Regular repairs, AfA depreciation (that's already been deducted annually)
Strategic Implications
The 10-year hold strategy
Many investors plan to hold rental properties for at least 10 years to unlock tax-free appreciation. Even if you need liquidity, refinancing (taking out equity) is often better than selling before 10 years.
Exception: Primary Residence
If you lived in the property yourself for at least 3 years (or in the year of sale and the previous 2 years), the sale is tax-free immediately—no 10-year wait required.
Related Terms
Appreciation(Wertsteigerung)
Appreciation is the increase in property value over time due to market forces, inflation, and improvements. In Germany, real estate has historically appreciated at 3-4% annually.
Exit Strategy(Ausstiegsstrategie)
An exit strategy is your plan for eventually selling the property. Key considerations include the 10-year capital gains tax exemption, market timing, and mortgage payoff.