Donations play an important role in the German legal system, influencing inheritances and asset transfers. Numerous regulations govern different types of gifts – whether taxes must be paid to the state primarily depends on the relationship with the donor. In this article, we discuss the tax rates for donations and gifts in Germany (donation tax) and present tax relief for family members.
Donation tax in Germany – when must it be paid?
The donation tax works according to the same principles as the inheritance tax in Germany – the same tax rates, allowances, and regulations apply. Anyone living in Germany who receives a gift exceeding the donation allowance must pay the due tax. Nationality does not matter – upon receiving a sufficiently valuable gift in Germany, the tax office demands its share. The amount depends on many factors, particularly the relationship to the donor.
Amount of inheritance and donation tax – who pays the most?
In Germany, the tax rate on donations and inheritances varies depending on the degree of relationship between the donor and the recipient. Generally, the tax is lowest for close family ties. The tax increases with the distance of the relationship. There are three tax classes for donation taxes, which determine the amount of tax owed.
Tax Class I includes:
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- Spouses, registered partners, children and stepchildren, grandchildren, parents and grandparents.
- Tax Class II includes:
- Parents and grandparents (for donations), siblings, nieces and nephews, stepparents, parents-in-law, and divorced spouses.
- Tax Class III includes:
- all other recipients of gifts not mentioned in other groups.
Donation tax 2025 – how much is it?
The amount of the donation tax also depends on the value of the gift and increases with its value. The final amount of tax to be paid is influenced by the combination of recipient and value of the gift. Members of tax class I pay a lower tax for the same value of donation than members of tax classes II and III.
What is the allowance for donation tax?
In Germany, there is an allowance for donation tax – an amount below which no taxes need to be paid. Familial ties play a key role here. For gifts within the closest family, most gifts are tax-free – taxes only apply to large amounts or items with high material value.
The allowances depend on the tax class:
Tax Class I:
- Spouses/registered partners: 500,000 euros
- Children: 400,000 euros
- Grandchildren: 200,000 euros
- Parents/Grandparents (for donations): 20,000 euros
Tax Class II:
- 20,000 euros
Tax Class III:
- 20,000 euros
The applicable allowances for donations in Germany are shown in the table.
The mentioned amounts are valid for 10 years, so within this period, only such tax-free deductions can be benefited from, regardless of the number of donations or inheritances received.
Allowance for inheritance tax on real estate
When transferring real estate as a gift, no transfer tax or income tax is required. The market value of the property must be determined to calculate the inheritance tax on it.
When spouses transfer a residential property to each other for joint use, this gift is exempt from tax. Under such circumstances, the gifting of a house or apartment can be fully exempt from inheritance tax.
How to avoid inheritance tax in 2025?
The allowance for inheritance tax is the same as for donations. The same rates apply, and there is a statute of limitations of 10 years. The closer the relationship, the better the tax class and thus the lower the tax burden.
For real estate, it’s different – the inheritance tax can be completely avoided here. If the house or apartment transferred upon death was used by the donor themselves, it is usually tax-free, provided the heir uses it themselves for at least ten years.
Allowances for donation tax – where must a gift be reported?
A gift must be reported to the tax office, with a deadline of 3 months from receipt. This is necessary if the allowance is exceeded. Required data and documents must be submitted by both the giver and the recipient. The report must include personal details of both parties, details of the relationship, description, and value of the gift.
For taxable donations, the reporting obligation also lies with the donor. All income earned in Germany must be presented to the tax office annually – this can be done with a tax declaration app like Taxando. For inheritances and donations, the PREMIUM package should be chosen, which also offers professional help from a tax advisor as well as a fast, secure, and high tax refund.
Maciej Wawrzyniak
In his private life, Maciej enjoys sporting challenges, playing the guitar, and swimming in the lake. He is also the proud father of three sons.
