When is the sale of a property a private disposal transaction?
The sale of a property can be considered a private sale transaction if the property is sold within ten years of purchase. In this case, you must tax the profit from the sale at your personal tax rate. However, this does not apply if the property was used for own residential purposes. In such cases, the sale is tax-free.
Exceptions to tax liability for own use
The Income Tax Act (§ 23 para. 1 sentence 1 no. 1 EStG) provides two exceptions for owner-occupied properties:
1. Alternative 1
The property was used continuously for own residential purposes between purchase and sale. In this case, the profit from the sale is tax-free.
2. Alternative 2
The property was used for own residential purposes in the year of sale and the two preceding years. It is not necessary for the use to cover three full calendar years. It is sufficient if the own use was continuous in the second year before the sale, while short-term own use is sufficient in the first and last year.
Example for the 2nd alternative
The Federal Fiscal Court has ruled that for the second alternative, continuous use over three calendar years is sufficient, even if the own use in two of these years was only short-term (BFH ruling of 3.9.2019, IX R 10/19). A continuous period of one year and two days can therefore be sufficient, provided the middle year was fully used for residential purposes.
Special features for sales within the family or in the event of divorce
- Sale of co-ownership shares after divorce: If a co-ownership share is sold to the former spouse after the divorce, this sale may be taxable if the property is sold within ten years of purchase and the seller no longer uses the property for own residential purposes (BFH ruling of 14.2.2023, IX R 11/21).
- Use by ex-partner or children: If a spouse moves out after separation and the home is used free of charge by the ex-partner or a child, this does not count as own residential use by the spouse who moved out. The sale may therefore be taxable (FG Münster, ruling of 19.5.2022, 8 K 19/20 E).
Profit from home office and home
The profit share of the home office also remains tax-free if one of the above exceptions applies to the entire home. This rule applies even if advertising costs for the home office were previously claimed (BFH ruling of 1.3.2021, IX R 27/19).
Conclusion
The sale of a property is generally taxable if it takes place within ten years of purchase. However, an important exception exists if the property was used continuously or in the year of sale and the two preceding years for own residential purposes. In such cases, the profit from the sale is tax-free. There are also tax peculiarities to consider in special situations such as sales after a divorce or the use of a home office.
