German Inheritance Tax Calculator 2026

German Inheritance Tax: A Comprehensive Guide for Expats

Inheritance tax (Erbschaftsteuer) in Germany is a significant consideration for expats who have built assets in Germany, who may inherit property from German relatives, or who are planning their own estate. The German system differs substantially from inheritance tax regimes in many other countries – it features generous allowances for close family members but steep rates for distant relatives and unrelated heirs. Understanding these rules is essential for effective estate planning.

The legal framework is the Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz or ErbStG). Notably, inheritance tax and gift tax are governed by the same law, using identical allowances and rates. This dual system creates powerful planning opportunities through lifetime gifts, as the tax-free allowances reset every 10 years.

Tax-Free Allowances (Freibeträge) by Relationship

The amount you can inherit tax-free depends entirely on your relationship to the deceased. Germany uses a system of personal allowances (persönliche Freibeträge) under §16 ErbStG:

A critical point for expats: unmarried partners receive only €20,000 tax-free and are taxed at the highest rates (30% to 50%). If you live with a long-term partner in Germany without being married, any inheritance above €20,000 will be taxed at punitive rates. This is one of the strongest financial arguments for marriage in Germany.

Inheritance Tax Rates

Once the tax-free allowance is exceeded, the remaining amount is taxed at rates that depend on the inheritance tax class and the size of the taxable inheritance:

When German Inheritance Tax Applies to Expats

German inheritance tax has a broad reach that can affect expats in several ways:

Unlimited Tax Liability (Unbeschränkte Steuerpflicht)

If either the deceased or the heir is a German tax resident at the time of death, all worldwide assets are subject to German inheritance tax. A person is considered a German tax resident if they have their domicile (Wohnsitz) or habitual residence (gewöhnlicher Aufenthalt) in Germany. Importantly, German citizens who have left Germany remain subject to unlimited inheritance tax liability for five years after emigration (extended to ten years for U.S. nationals under the German-U.S. estate tax treaty).

Limited Tax Liability (Beschränkte Steuerpflicht)

Even when neither the deceased nor the heir is a German resident, German inheritance tax applies to domestic assets (Inlandsvermögen) under §121 of the Valuation Act (BewG). This includes:

• Real estate located in Germany
• German business assets and business interests
• Shares in German corporations if the holder owned at least 1% of the share capital
• Claims secured by German real estate (mortgages)

Special Exemption for the Family Home

One of the most valuable inheritance tax exemptions is the family home exemption under §13 paragraph 1 no. 4b and 4c ErbStG. If the deceased owned and occupied a residential property, the surviving spouse and children may inherit it completely tax-free, provided they meet specific conditions:

• Surviving spouse: Must continue to live in the property for at least 10 years after the inheritance. No size limit applies. The exemption is lost if the spouse moves out within 10 years (unless for compelling reasons such as needing long-term care).
• Children: Must also live in the property for at least 10 years, but the exemption is limited to a living area of 200 square metres. Any area beyond 200 square metres is included in the taxable estate.

For expats who own property in Germany and plan to pass it to family members, this exemption can save hundreds of thousands of euros in inheritance tax.

Gift Tax: Strategic Planning With the 10-Year Rule

Since gift tax and inheritance tax share the same allowances, and the allowances reset every 10 years, strategic lifetime gifting is one of the most effective estate planning tools in Germany. For example, a parent can gift €400,000 to a child tax-free, wait 10 years, and gift another €400,000 tax-free. Over a 30-year period, €1.2 million can be transferred without any tax.

For married couples, both parents can each gift the full allowance to each child. Two parents with two children can transfer €400,000 x 2 parents x 2 children = €1.6 million tax-free every 10 years.

Double Taxation Agreements

Germany has inheritance and gift tax treaties with only a handful of countries, including the United States, France, Denmark, Greece, Sweden, and Switzerland. These treaties typically determine which country has the primary right to tax and provide mechanisms to avoid double taxation. For countries without a treaty, Germany provides a unilateral credit under §21 ErbStG for foreign inheritance tax paid on the same assets.

Expats from countries with which Germany has no treaty should seek professional advice to ensure they do not pay tax twice on the same inheritance. The interaction between two countries' inheritance tax systems can be complex, particularly when real estate in multiple jurisdictions is involved.

Reporting Obligations

The tax office (Finanzamt) is automatically notified about inheritances by the civil registry office (Standesamt) and about gifts by the notary. However, heirs and gift recipients have their own reporting obligation under §30 ErbStG: they must notify the tax office within three months of learning about the inheritance or gift. Failure to report can lead to back-taxes, interest charges, and in severe cases, criminal prosecution for tax evasion.

Practical Tips for Expats

• Consider marriage: Unmarried partners face the highest tax rates (30% to 50%) with only a €20,000 allowance. Marriage increases the allowance to €500,000 and reduces rates dramatically.
• Plan gifts early: Start transferring assets to the next generation as early as possible to take advantage of the 10-year reset of allowances.
• Keep the family home: If you inherit an owner-occupied property, ensure you meet the 10-year residence requirement to preserve the full exemption.
• Check your tax residency: German tax residency creates unlimited inheritance tax liability on worldwide assets. Be aware of the 5-year extended liability after leaving Germany.
• Create a German will (Testament): A will drafted under German law can prevent disputes and ensure your estate plan accounts for German inheritance tax rules.
• Seek professional advice: For cross-border inheritance situations, consulting a tax advisor (Steuerberater) who specializes in international inheritance tax is essential.