Speculation tax in Germany: what the ten-year rule hands back to you

After ten years every fixed rate is free to break

Ten years after full payout you may end the loan on six months notice, all of it or any part, with no penalty, even on a twenty-year fix (Sec. 489 (1) no. 2 BGB). That date also caps what the bank may claim on an earlier exit.

Fixed below about 3.3 per cent, your penalty is probably zero

The bank is compensated for a loss, and it measures what relending earns at mortgage-bond yields: 3.06 per cent over one year and 3.32 over five (Bundesbank, 19 August 2026). Below that curve there is no loss and no penalty. Everyone who fixed between 2019 and 2021 is under it right now.

Unused special repayment rights come off the penalty

The one per cent ceiling of Sec. 502 (3) BGB covers general consumer loans, not mortgages. Your defences sit in the contract instead: unused Sondertilgung must be credited (BGH XI ZR 388/14), and if the mandatory disclosures were wrong the claim falls away entirely (Sec. 502 (2) no. 2 BGB).

Inside the ten years, the penalty cuts your tax

A prepayment penalty is not deductible against rent (BFH IX R 42/13), but where the sale is a taxable private disposal it counts as a cost of disposal and reduces the gain (IX R 17/24). So in year nine roughly 42 per cent of it comes straight back off the tax bill. In year eleven it is zero anyway.

Sell in the calendar year after you leave, not in the year you go

Sell while resident and the gain lands on top of your German salary at your top rate. Sell as a non-resident and it is assessed on its own: you lose the basic allowance (Sec. 50 (1) sentence 2 EStG) but start at the bottom of the tariff. In the model case a 33,290 EUR gain costs 15,412 EUR as a resident and 9,049 EUR once you have left. Sec. 2 (7) sentence 3 EStG counts any part-resident year as a full resident year, so the notary date decides, not the flight.

Send us the loan agreement and we read it with you.

An illustrative case, not a client. In 2022 a software engineer on a Blue Card buys a 350,000 EUR flat in Frankfurt and lets it out. In 2029 a role in Singapore arrives. The flat would fetch 395,000 EUR, and about 244,000 EUR is still owed at 3.8 per cent, fixed until 2032.

Selling in 2029, holding year seven

Depreciation written back since 2022: 43,343 EUR. Taxable gain under Sec. 23 (3) EStG: 33,290 EUR. Income tax and surcharge as a resident: 15,412 EUR. Prepayment penalty to the bank: 3,957 EUR. Cost of leaving early: 19,369 EUR.

Waiting until 2033, holding year eleven

The same flat then produces a gain of 62,015 EUR and the tax is nil. The loan can end with six months notice at no cost. The gain did not shrink; the two deadlines expired.

The third route most people in this position take

Keep the flat and let it from Singapore. The rent stays taxable in Germany (Sec. 49 (1) no. 6 EStG) and without the basic allowance the first euro of net rental income is taxed (Sec. 50 (1) sentence 2 EStG). While the loan runs that costs almost nothing: interest of 9,300 EUR and depreciation of 6,192 EUR against 12,000 EUR of rent leaves a negative result. Four more years of letting is the cheaper route, and in 2033 the sale is tax free.

Put your own year into the calculator, then read the year-eleven column. Or send us your figures and we run all three routes side by side.

If you can bridge three to five years, keeping the flat usually wins.

Tax on the gain

Selling inside ten years: your full personal rate under Sec. 23 EStG. Waiting: none. Letting from abroad: none until you eventually sell.

Depreciation written back

Selling inside ten years: all of it, added to the gain. Waiting: irrelevant. Letting from abroad: it keeps running in your favour.

Prepayment penalty

Selling inside ten years: yes, and uncapped on a mortgage. After year ten: none. Letting on: none.

What it usually means

Sell inside the ten years when the move cannot wait or the gain is small. Waiting is the cheapest exit if you can reach it. Letting from abroad is the default for a three to five year gap, with a German tax return each year and the currency risk carried until you sell.

Tell us the years and we price all three.

How is the ten-year period actually counted?

From the binding purchase contract to the binding sale contract, to the day (Sec. 23 (1) sentence 1 no. 1 EStG). Payment and the land register entry do not count. A contract signed on 14 March 2022 leaves the period on 15 March 2032. A sale contract signed three days earlier makes the full gain taxable.

I lived in the flat for a while. Does that make the sale tax free?

Yes, in two cases. Sec. 23 (1) sentence 1 no. 1 sentence 3 EStG exempts a home you used yourself for the whole period, or in the year of sale plus the two calendar years before it. The so-called three-year rule is that second test; it applies when you lived there yourself at the end.

The flat sells for exactly what I paid. Can there still be tax?

Yes. Sec. 23 (3) sentence 4 EStG takes the depreciation you deducted off your acquisition cost, so every euro of write-off comes back into the gain. Working the other way, transfer tax, notary and agent count as acquisition cost too, about 37,000 EUR on a 350,000 EUR flat. Straight-line depreciation needs roughly eight years to offset that, so on a flat that gained nothing the taxable gain appears around year eight.

What happens if I have already left Germany when I sell?

The sale stays taxable here (Sec. 49 (1) no. 8 EStG) and the treaties agree. What changes is the rate: you lose the basic allowance, but the gain is assessed on its own rather than on top of a German salary, which usually makes it cheaper. Note: a year in which you were resident for any part counts as a resident year (Sec. 2 (7) sentence 3 EStG).

Do I owe a penalty if I sell during the fixed-rate period?

Sec. 490 (2) BGB lets you end the loan early when you sell, on three months notice, and there the penalty is owed. Past ten years from full disbursement, Sec. 489 (1) no. 2 BGB gives you the same exit free of charge. Ask the bank for the calculation in writing and check it against your special repayment rights.

Ask any other question in a free 15-minute call in English.

Privates Veraeusserungsgeschaeft

Private disposal: a sale inside ten years, with its own tax annex.

Veraeusserungsgewinn

Disposal gain: sale price minus selling costs minus the written-down cost.

Zinsbindung

Fixed-rate period. Ask the bank in writing for end and payout dates.

Sondertilgung

Special repayment right. Unused rights reduce a prepayment penalty.

Lastenfreistellung

Release of encumbrances: the bank lifts its charge against payment.

Gewerblicher Grundstueckshandel

Commercial property trading: over three sales in about five years ends the ten-year rule.

Send us any German document and we read it with you in English.

The figure on this page. 12,450 EUR is the income tax and surcharge (5,515 EUR) plus the prepayment penalty (6,935 EUR) on a sale today in the model case: a flat bought in 2022 for 350,000 EUR, worth 395,000 EUR, with 265,000 EUR still owed at 3.8 per cent. Both fall to zero once the ten-year period of Sec. 23 EStG runs out in 2032 and the loan can end under Sec. 489 (1) no. 2 BGB, which is why the same number is both what a sale costs today and what you keep by waiting. It moves with the calendar as well as with your inputs. The model assumes the flat is let throughout, so the own-home exemption of Sec. 23 (1) sentence 1 no. 1 sentence 3 EStG does not apply. The agent is paid on either date and therefore sits outside the comparison.

The calculator. The ten-year period follows Sec. 23 (1) sentence 1 no. 1 EStG, contract to contract. Depreciation written back follows Sec. 23 (3) sentence 4 EStG at 2.0 per cent of 80 per cent of the acquisition cost, which includes purchase costs at 10.57 per cent (transfer tax at the median of the sixteen state rates, notary and land registry from GNotKG Tabelle B, the buyer’s 3.57 per cent of the agent fee). Income tax uses the 2026 tariff of Sec. 32a EStG on top of an assumed 92,000 EUR of other income, plus the solidarity surcharge; church tax is not included. The 1,000 EUR exemption of Sec. 23 (3) sentence 5 EStG is a threshold, not an allowance: one euro over and the whole gain is taxable.

The prepayment penalty. Calculated by the active-passive method (BGH XI ZR 267/96 and XI ZR 197/96) with reinvestment and discounting on the Bundesbank mortgage-bond curve of 19 August 2026, saved risk costs of 0.06 percentage points and 60 EUR a year of administration. Unused special repayment rights would have to be credited (BGH XI ZR 388/14) and the calculator does not know yours, so the figure is the upper edge.

Not an offer. Orientation figures, not individual tax advice, not a lending decision and not an offer. Expat Finance Germany is a broker tied to no single bank and is licensed under Sec. 34c, 34d, 34f and 34i GewO; register numbers are on the about page, in the imprint and in the small print.

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