Any financial savings is welcome when buying a property or building a house. Federal Finance Minister Christian Lindner also sees it this way: He calls for property transfer taxes in the federal states to be drastically reduced, or even completely zeroed.

Currently, when purchasing land and a house, between 3.5 and 6.5 percent of the purchase price is charged, a considerable amount. Lindner argues that owner-occupied living space must remain affordable to the broad middle swathe of society. However, the tax is one of the state taxes and most federal states refuse to give up their revenue.

Citizens should not wait for this tax to be eliminated if they want to reduce costs when building or buying a house. Here are five savings tips to reduce property transfer tax.

First buy the land and then build.

You can save enormously on property transfer tax by separating the purchase of land and the construction of a home. At first, the land alone is purchased and the tax is applied only to that land. However, if you purchase both directly from a single source, tax is due on the total purchase price.

For example, if the property costs 200,000 euros, with a tax rate of 5.5 percent, 11,000 euros are paid to the State. If the costs of the land and construction total 600,000 euros, 33,000 euros in real estate transfer tax will be applied.

It is important that you do not purchase the land from the company that is building the house. Ideally, half a year would elapse between both contracts.

No real estate transfer tax for close relatives

Anyone who purchases land or real estate privately from a first-degree relative is exempt from the property transfer tax. Close relatives include spouses, parents and children, but also grandparents and grandchildren. This means that you do not have to pay property transfer tax if you buy property from your grandmother or father, for example.

The real estate transfer tax does not apply to donations and inheritances

You are also exempt from property transfer tax if the land or property is transferred to someone as a gift or inheritance. In both cases, taxes must still be paid: instead of the property transfer tax, you usually have to pay a gift or inheritance tax.

Inventory is not subject to property transfer tax.

The tax base for the real estate transfer tax is the purchase price of a land or property. Inventories such as furniture and fixtures, such as an equipped kitchen, awnings or lamps, are not included. The following applies: The property transfer tax must only be paid on what is not movable and is inextricably linked to the property.

If you are purchasing an existing building and taking over the previous owner's inventory, it may be worth including the furniture separately in the purchase contract. In general, tax offices only require receipts if the costs of mobile phone extras represent more than 15 percent of the purchase price.

Deduct the property transfer tax from the tax

Self-employed individuals and self-employed workers can deduct the property transfer tax as a business expense as long as they use the acquired property for their business. If the entire building is not used for professional purposes, a clear distinction between the private part and the commercial part must be made in the purchase contract. When renting or leasing, the property transfer tax on the purchased property can be recorded as a business expense.

Information: Town and Country House

By Uwe Lehmann