Erbschaftsteuer on Real Estate and Houses 2026: Valuation, Exemptions

How is real estate valued?

The tax office values real estate using three principal methods (§§ 176 ff. BewG):

Anyone who receives the tax office's valuation assessment should ALWAYS cross-check the assumed value against independent estate-agent estimates. In 20-30 percent of cases the assumed value is too high — an objection is possible and often worthwhile.

The two Familienheim exemptions

Familienheim for spouses (§ 13 (1) Nr. 4b ErbStG)

If the surviving spouse inherits the jointly self-occupied Familienheim and continues to live in it themselves:

• FULLY TAX-FREE (no size limit)
• 10-year holding period
• If self-occupation is given up (move, sale, letting), the exemption falls away retrospectively
• Exception: compelling reasons (care home, severe illness)

Familienheim for children (§ 13 (1) Nr. 4c ErbStG)

If a child inherits the self-occupied parental home and moves in themselves within 6 months:

• Up to 200 sqm of living space TAX-FREE
• Above 200 sqm: pro-rata valuation discount
• 10-year self-occupation holding period
• Retrospective taxation if abandoned

These exemptions are the most important lever for inherited real estate. With an 800,000 EUR Familienheim of 200 sqm, a child can inherit 800,000 EUR tax-free — without the exemption, around 50,000 EUR of tax would arise.

Let real estate: 10 percent valuation discount

For let residential real estate, the ErbStG grants a valuation discount of 10 percent (§ 13d ErbStG). The discount applies on top of the normal Freibetrag — so it is automatic.

Condition: the property is let for residential purposes (not commercial). Holding period: none, the discount applies regardless of later self-occupation.

Worked example: let condominium with 400,000 EUR market value.

• Valuation discount: 10 percent = 40,000 EUR
• Value assumed for tax purposes: 360,000 EUR
• For a child with a 400,000 EUR Freibetrag: fully tax-free

For non-residentially let objects (business premises, offices) the discount does not apply.

Step-by-step: optimise an inherited property in 7 stages

1. Determine the market value. Expert appraisal (1,000-3,000 EUR) as a negotiating basis with the tax office.
2. Test the Familienheim conditions. Who lives in it? Who could move in? With several children: who is interested?
3. Schenkung strategy 10 years before the inheritance. Transfer with reserved Niessbrauch reduces the assessed value by 30-50 percent.
4. Combine lifetime gifts. Several properties can be transferred in 10-year tranches — Freibetraege can be used multiple times.
5. Use let properties under the favourable valuation rule. 10 percent valuation discount on residentially let objects — automatic.
6. Familienpool or Stiftung (foundation) for large estates. From 2-5 million EUR in real-estate value, a structural change pays off.
7. Review the valuation assessment. An objection against an overstated valuation is possible — deadline 1 month.

Comparison: Familienheim with and without exemption

Starting point: Familienheim 800,000 EUR market value, 180 sqm of living space, one child as heir after the death of the surviving parent.

Anyone using the parental home themselves saves 60,000 EUR in this constellation. Anyone inheriting it as an investor pays in full.

Multiple properties: division strategies

When the estate contains several properties and several children are appointed as heirs, conflict often arises. Three strategies:

In my practice, physical division (each child gets their own property) is usually the cleanest solution for two to three properties. With more than three properties or very different values, a Familienpool is often optimal.

More on this: Topic hub Erbengemeinschaft.

Frequently asked questions

How is a house valued for Erbschaftsteuer?

At its current market value (§§ 176 ff. BewG). Three methods: comparative-value method (condominiums), income-capitalisation method (apartment buildings), asset-value method (single-family houses). The tax office sends a valuation assessment — an objection is possible within 1 month.

What is the Familienheim exemption?

A full tax exemption for the jointly self-occupied Familienheim if the heir continues to use it. For spouses there is no size limit; for children, the exemption applies up to 200 sqm of living space. 10-year holding period.

What happens if I sell the house within 10 years?

The Familienheim exemption falls away retrospectively. The Erbschaftsteuer is recalculated and assessed after the fact. Exceptions apply only on compelling grounds (care home, severe illness, professional relocation to another city).

How high is the Erbschaftsteuer on an inherited property?

It depends on the market value, the Freibetrag and the degree of relationship. For a child with a 400,000 EUR Freibetrag and a 600,000 EUR property: 200,000 EUR taxable × 11 % = 22,000 EUR. With Familienheim exemption: 0 EUR.

What about let real estate?

10 percent valuation discount automatically (§ 13d ErbStG). Plus the normal Freibetraege. No Familienheim exemption, because not self-occupied.

Can I contest the tax office's valuation?

Yes, by objection within 1 month. An independent expert appraisal is the basis. With substantial valuation differences (>10 percent) the objection is almost always worthwhile. With smaller deviations the administrative effort exceeds the saving.

Which renovation and refurbishment costs can I deduct?

Renovation costs from the last 3 years before death are deducted from the value, provided they did not contribute to an increase in value. With larger renovations (energy efficiency, modernisation) a separate valuation is often needed.

Is reserved Niessbrauch on parental property worthwhile?

For tax purposes very often yes — valuation discount of 30-50 percent. From the children's economic perspective it is often disadvantageous (no power of disposal, renovation costs). Set out in detail in the pillar article Niessbrauch disadvantages for children.

Further detailed answers

• Erbschaftsteuer 2026: Freibetraege, tax rates, instructions — Main guide
• Erbschaftsteuer Freibetraege — table 2026
• Erbschaftsteuer for children
• Calculate Erbschaftsteuer — formula and calculator
• Transfer a house 2026: instructions — Lifetime transfer
• Niessbrauch on a house
• Co-heir community with real estate
• Topic hub Erbschaftsteuer

Lead magnet: structuring an inherited property

• Erbschaftsteuer calculator — calculation of the tax burden for your property.
• Succession checklist — lead-time plan for property transfer.
• Emergency case — documentation of all properties and encumbrances.
• Book a first meeting — individual real-estate strategy.

Authority sources

• § 13 ErbStG (tax exemptions, Familienheim)
• § 13d ErbStG (valuation discount for let residential property)
• § 14 ErbStG (10-year rule)
• § 16 ErbStG (Freibetraege)
• § 17 ErbStG (pension-allowance)
• § 30 ErbStG (notification duty)
• §§ 176 ff. BewG (valuation of land)
• § 1030 BGB (Niessbrauch)
• BFH judgment of 17.06.2020 — II R 33/17 (Familienheim exemption for children)
• BFH judgment of 27.11.2019 — II R 1/16 (Verschonungsabschlag — tax exemption of 85 or 100 percent on qualifying business assets, §§ 13a/13b ErbStG)
• BFH judgment of 24.10.2017 — II R 44/15 (valuation of apartment buildings)