Hello! I own a plot of land and am currently the sole owner in the land registry. Now, I want to build a house on it together with my boyfriend. Naturally, he will also contribute 50% to the future mortgage.
My question is: How can we secure his ownership rights—preferably in a cost-effective way?
1.) Gift? The tax-free allowance here for unmarried couples is only 20,000 EUR. The land is definitely worth much more (400 EUR per sqm (107 USD per sqft) according to the official land value on 757 sqm (8145 sqft)).
2.) Sale of a share? Is it possible for me to sell him part of the land for, say, 1 EUR to avoid property transfer tax?
3.) I transfer part of the land to him—how is the value of the land and therefore the amount of property transfer tax determined? I only bought the plot 2.5 years ago. There is still an outstanding loan. Will the purchase price from 2.5 years ago be used, or the official land value instead?
4.) I transfer only a minimum share of 10%, and we arrange the exact division through a cohabitation agreement (or a marital contract).
5.) Any other options?
Have you ever faced a similar issue?
I have called several tax offices, but unfortunately, no one has time for us. The COVID crisis is causing a lot of extra workload there :-(
Thanks in advance!!
My question is: How can we secure his ownership rights—preferably in a cost-effective way?
1.) Gift? The tax-free allowance here for unmarried couples is only 20,000 EUR. The land is definitely worth much more (400 EUR per sqm (107 USD per sqft) according to the official land value on 757 sqm (8145 sqft)).
2.) Sale of a share? Is it possible for me to sell him part of the land for, say, 1 EUR to avoid property transfer tax?
3.) I transfer part of the land to him—how is the value of the land and therefore the amount of property transfer tax determined? I only bought the plot 2.5 years ago. There is still an outstanding loan. Will the purchase price from 2.5 years ago be used, or the official land value instead?
4.) I transfer only a minimum share of 10%, and we arrange the exact division through a cohabitation agreement (or a marital contract).
5.) Any other options?
Have you ever faced a similar issue?
I have called several tax offices, but unfortunately, no one has time for us. The COVID crisis is causing a lot of extra workload there :-(
Thanks in advance!!
Tolentino schrieb:
But if the land is still being financed, what does the bank say if I simply gift half of it?You should inform the bank and obtain their approval, as a new purpose declaration for the mortgage might be required. However, as long as the bank holds the mortgage, they should agree to it. Regardless, I understand that the property is free of debts.
Tolentino schrieb:
And what happens if you get married only after building the house, and the gift effectively increases by the value of the house (or half of it), since a house always belongs to whoever owns the land beneath it...
In some areas, could the tax-free allowance for gifts be exceeded in that case?In my opinion, the value of the land plus the building is considered, but naturally minus any outstanding loan.
Tolentino schrieb:
Then is the tax applied only to the amount exceeding the allowance, or to the entire amount?A tax-free allowance is not a tax-free threshold, so only the value exceeding the allowance is taxed.
I was considering whether to say something. Please don’t take this the wrong way. The situation is somewhat "typically female" (I am one myself).
The plot of land is worth around €300,000 (about $320,000). Now you are thinking about gifting 50% to secure your partner’s interest in the house construction. So the gift would be €150,000 (about $160,000). After that, you would both own half, and of course, you would share the mortgage for the house. However, as you mentioned, you would pay off the loan for the land yourself.
What I want to emphasize is this: don’t just protect your partner, but also protect yourself. At least be fully aware of what the gift means for your own assets if things don’t stay rosy in the future. Sometimes women can be a bit overenthusiastic, and in the end, they lose out financially. This is not a trivial amount, after all.
If you want to give him that amount as a conscious gift, I absolutely have nothing against it. But please: make sure it’s a fully conscious decision.
I say this as someone with painful personal experience in a similar situation. And now I’ll end this unsolicited advice...
The plot of land is worth around €300,000 (about $320,000). Now you are thinking about gifting 50% to secure your partner’s interest in the house construction. So the gift would be €150,000 (about $160,000). After that, you would both own half, and of course, you would share the mortgage for the house. However, as you mentioned, you would pay off the loan for the land yourself.
What I want to emphasize is this: don’t just protect your partner, but also protect yourself. At least be fully aware of what the gift means for your own assets if things don’t stay rosy in the future. Sometimes women can be a bit overenthusiastic, and in the end, they lose out financially. This is not a trivial amount, after all.
If you want to give him that amount as a conscious gift, I absolutely have nothing against it. But please: make sure it’s a fully conscious decision.
I say this as someone with painful personal experience in a similar situation. And now I’ll end this unsolicited advice...
face26 schrieb:
Regardless, I understand that the property is debt-free. Hauherr2020 schrieb:
I bought the property only 2.5 years ago. There is still an outstanding loan. face26 schrieb:
In my opinion, the value is based on the land plus any buildings but, of course, minus the remaining loan amount. Important info!
So, there might be an option here for the original poster even without marriage. If not much has been repaid yet...
If 100% of the land value divided by 2 minus the outstanding loan amount is less than or equal to 20,000 EUR (about 21,500 USD),
then no gift tax applies...!?
face26 schrieb:
It's an exemption amount, not a threshold limit, meaning only the amount exceeding that is taxed. Thank you
Why should he become the owner of the land? If at all, he should simply buy half of it from you. Otherwise, just make an agreement regarding payment in case of separation, and that should be fine. Keep in mind, however, that he would have housing costs anyway, even without the house. So these should be deducted when calculating the payout amount.
Hauherr2020 schrieb:
I purchased the plot of land just 2.5 years ago. There is still an outstanding loan. Here is the statement again regarding the topic "loan for the land."Okay, my bad! I overlooked in point 3) that there is still a loan on the property. That obviously makes things a bit more complicated. I would then approach the bank. Because if the partner is to be included halfway with all legal consequences as desired, then they should of course also be included halfway in the property loan.
As mentioned, consider whether marriage is a short-term option. Then approach the lending bank. Depending on the remaining term and outstanding balance, it might be possible to refinance or include the partner in the loan.
As mentioned, consider whether marriage is a short-term option. Then approach the lending bank. Depending on the remaining term and outstanding balance, it might be possible to refinance or include the partner in the loan.