Inheritance Tax in Germany — Allowances, Tax Rates and Tips

What is Erbschaftsteuer?

Erbschaftsteuer is a tax levied on assets you receive through inheritance or gift. In Germany, it is regulated by the Inheritance and Gift Tax Act (ErbStG).

Important: Erbschaftsteuer is not automatic — whether you must pay taxes depends on the value of the inheritance and the Freibetrag (tax allowance) you are entitled to.

Freibeträge — How Much is Tax-Free?

Freibeträge depend on your degree of relationship to the deceased:

| Heir | Tax Class | Freibetrag |
|------|-------------|-----------||
| Spouse / registered life partner | I | €500,000 |
| Children, stepchildren | I | €400,000 |
| Grandchildren (parents alive) | I | €200,000 |
| Grandchildren (parents deceased) | I | €400,000 |
| Parents and grandparents (on inheritance) | I | €100,000 |
| Siblings | II | €20,000 |
| Nieces, nephews | II | €20,000 |
| All others (friends, life partner) | III | €20,000 |

Additional Freibeträge

• Versorgungsfreibetrag for spouse: €256,000 (in addition to personal Freibetrag, minus pension claims)
• Versorgungsfreibetrag for children: €10,300–52,000 (depending on age)
• Household items: €41,000 (Tax Class I) or €12,000 (Tax Classes II/III)
• Family home: Owner-occupied family home is completely tax-free for spouses and children (up to 200 m²) if you continue to live there for 10 years

Tax Rates

Tax rates depend on the value above the Freibetrag and tax class:

| Value Above Freibetrag | Class I | Class II | Class III |
|---------------------|----------|-----------|------------||
| Up to €75,000 | 7% | 15% | 30% |
| Up to €300,000 | 11% | 20% | 30% |
| Up to €600,000 | 15% | 25% | 30% |
| Up to €6,000,000 | 19% | 30% | 30% |
| Up to €13,000,000 | 23% | 35% | 50% |
| Up to €26,000,000 | 27% | 40% | 50% |
| Over €26,000,000 | 30% | 43% | 50% |

Calculation Example

Child inherits €600,000 from a parent:

1. Freibetrag: €400,000
2. Taxable amount: €600,000 – €400,000 = €200,000
3. Tax rate (Class I, up to €300,000): 11%
4. Erbschaftsteuer: €200,000 × 0.11 = €22,000

Friend inherits €100,000 from a friend:

1. Freibetrag: €20,000
2. Taxable amount: €100,000 – €20,000 = €80,000
3. Tax rate (Class III, up to €300,000): 30%
4. Erbschaftsteuer: €80,000 × 0.30 = €24,000

Reporting Obligations

What Must I Do?

1. Report Erbschaft/Schenkung to the tax office — within 3 months of becoming aware of it
2. Inheritance tax return — only if the tax office requests it (not automatic)
3. Tax payment — deadline: usually 1 month after tax assessment

When is the Tax Waived?

• Inheritance is below the Freibetrag — no tax, but reporting obligation still applies
• Family home — tax-free under certain conditions
• Business assets — 85–100% tax-free if business continues

Schenkungsteuer — Gifts During Lifetime

Schenkungsteuer has the same Freibeträge and tax rates as Erbschaftsteuer. The advantage: Freibeträge can be used again every 10 years.

Strategy: Gift Instead of Inheritance

• Parents gift child: €400,000 tax-free
• After 10 years another €400,000 tax-free
• In 30 years: €1,200,000 transferred tax-free!

Erbschaftsteuer and Foreigners

Unlimited Tax Liability

German Erbschaftsteuer applies if:

• The deceased had their place of residence in Germany, OR
• The heir has their place of residence in Germany, OR
• Domestic assets are inherited (e.g., property in Germany)

Double Taxation Treaties (DBA)

Germany has a DBA for Erbschaftsteuer with only a few countries:

• USA, France, Denmark, Greece, Sweden, Switzerland

In all other cases: Credit of inheritance tax paid abroad against German tax (§ 21 ErbStG) — to avoid double taxation.

Inheritance from Abroad

If you live in Germany and inherit from your home country:

• Reporting obligation in Germany
• Freibeträge apply the same way
• Possibly foreign inheritance tax will be credited
• Valuation of foreign assets according to German rules

Tips

1. Know your Freibeträge — inheritance often falls below the threshold
2. Plan ahead — save taxes through gifts during lifetime (10-year cycle)
3. Use family home benefit — owner-occupied house is tax-free for spouses and children
4. Consult a tax advisor — for larger inheritances, professional advice pays off
5. Report foreign inheritance — even if already taxed in your home country

Status: March 2026. All information without warranty.