When can I sell my property tax-free?
Section 23 EStG: the speculation period explained simply
Section 23 of the Income Tax Act governs when the sale of a property is taxable. The basic rule:
You can work out how high the tax would be in your case in two minutes with the speculation tax calculator — and whether selling now pays off at all you can read under selling a property at a profit.
Let properties
Tax-free after a 10-year holding period. The period begins with the date of the notarised purchase contract — not with the land-register entry, not with the handover of keys.
Owner-occupied properties
Tax-free if you lived in it yourself in the year of sale and the two preceding calendar years. This means: with owner-occupation, the sale can be tax-free after just three calendar years.
Special case owner-occupation: tax-free after 3 years
The three-year rule is the most frequently overlooked tax advantage when selling property. It also applies if the property was previously let.
Example: in 2018 you buy an apartment as an investment. In 2022 you give the tenant notice for personal use and move in yourself. In 2025 you sell. Result: tax-free — even though the 10-year period has not yet elapsed.
Important: You must have lived there yourself in the year of sale and in the two calendar years before it. Only the middle year has to be covered in full — for the first and the last, part of the year is enough. That is why a good two years are often sufficient in practice. “Owner-occupation” means: you or your children (for whom you receive child benefit) live there. Vacancy does not count. Letting to friends does not count.
Calculating the speculation tax: what would be due?
When the speculation tax applies, the gain is taxed at your personal income tax rate. Not at a flat rate — but on top of your other income.
Worked example for a Dresden apartment
With a taxable income of 60,000 euros your marginal tax rate is around 38.6 percent — the 42 percent rate only starts at 69,879 euros. But the speculation gain of 81,780 euros comes on top and largely falls into the 42-percent zone. The tax is worked out as a difference: once with the gain, once without. The top rate of 45 percent only starts at 277,826 euros — this example does not get that far.
Dresden apartment 2019–2026
- Property transfer tax 3.5% (2019 rate)6.300 €
- Notary and land registry2.700 €
- Agent's commission, seller's share 3.57%9.282 €
- Deletion of land charge350 €
- Energy performance certificate150 €
These are assumed figures. In Saxony the commission is customarily 7.14 percent including VAT, split equally between buyer and seller. It is not fixed by law and is negotiable in the individual case. The property transfer tax is calculated at the 3.5 percent rate in force in Saxony in 2019; since 1 January 2023 it has been 5.5 percent.
All tax amounts follow the basic income tax tariff (Grundtarif) for the 2026 assessment period, without the solidarity surcharge and church tax. Both may come on top: the solidarity surcharge at 5.5 percent of the income tax above the exemption threshold, and church tax in Saxony at 9 percent of the income tax. Tariff values change every year.
Special cases: inherited properties, gifts, production costs
Inherited properties
The deceased's holding period is credited. If your mother bought the apartment in 2014 and you inherit it in 2025, the sale is immediately tax-free. The period runs from your mother's purchase date — not from the inheritance.
Gift
As with inheritance — the donor's holding period is carried over. If your father gave you an apartment in 2024 that he bought in 2012, you can sell tax-free immediately.
Subsequent production costs
If you carried out extensive renovation after the purchase (e.g. loft conversion, extension), these costs can reduce the taxable gain. But beware: only production costs count, not maintenance expenses. The distinction is complex — ask a tax advisor.
Multiple sales
If you sell more than three properties within five years, the tax office may assume commercial property trading. Then entirely different tax rules apply — considerably less favourable. Watch out for the three-object limit.
Strategic tips: optimise the timing
Waiting almost always pays off.
If you are only one or two years away from tax exemption, wait. The saving almost always exceeds the risk of a slight price drop. In the worked example above it is around 34,200 euros — measured against the sale price of 260,000 euros, a good 13 percent. The market would first have to give up that much before waiting stopped paying. And do not simply reckon with a flat 42 percent: what the tax exemption is worth is the difference between your tax with and without the gain — and that is almost always lower.
Plan for owner-occupation.
If the 10-year period is still far off: check whether three years of owner-occupation is an option. Move into the apartment, live there for three calendar years, sell tax-free.
Use interim letting.
Want to sell but the period is still running? Let the property in the meantime. The rental income covers the running costs, and you can wait out the tax exemption in peace.
Mind the time of sale within the calendar year.
For the three-year rule, calendar years count, not full years. A sale on 2 January is identical for tax purposes to a sale on 30 December of the same year.
Dresden market context: wait or sell now?
The Dresden market is stable in 2026. Moderate price increases of 2–4 percent per year in good locations. No boom, no crash.
2016 or earlier
The 10-year period has elapsed or will soon. Selling tax-free is possible. The market offers solid prices — no reason to wait, no reason to rush.
2019–2021
Still 3–5 years until tax exemption. In most cases it pays to wait. The speculation tax on gains from the boom phase is substantial.
2022 or later
The gains are small or non-existent (price correction 2023). A sale before the period ends would be unproblematic for tax — but rarely makes economic sense.
Note: the tax matters presented on this page are simplified. For your individual situation we recommend consulting a tax advisor.
