What tax implications of inheritance

Community of heirs: what do I have to consider in terms of taxation?

If a loved one dies and leaves behind several heirs, the estate becomes the collective property of the heirs. The heirs form a so-called community of heirs. Each member of the community of heirs is referred to as a co-heir - in contrast to the sole heir.

Since the community of heirs is entitled to the property jointly, it will Community of hands called. All movable and immovable items in the estate become joint property, all claims become joint hand claims. Very simplified: everything belongs to everyone together.

In the case of a community of heirs, the inheritance tax is not set for the community of heirs together, but for each heir individually. We answer the most important questions about the community of heirs and the tax return.

By the way:

From a tax point of view, it does not matter whether you became a member of the ecclesiastical community as an heir due to legal succession or through a will. Every co-heir must fill out a tax return.

Is the community of heirs established on a permanent basis?

No, the community of heirs is usually not a permanent solution. On the contrary: the community of heirs is fundamentally designed to be dissolved. Every heir should get the rightful inheritance as quickly as possible. Accordingly, a community of heirs is also not legally competent.

How do you dissolve a community of heirs?

Every co-heir generally has the right to request the dissolution of the community of heirs. The dissolution of fellowship is called "dispute". Usually the Hereditary dispute completed when the inheritance is divided among the members of the community of heirs.

If the heirs are in agreement, one heir can also pay off the other and thus become the sole owner of the inheritance. The joint sale of the inheritance to a third person is also possible. The selling price is then divided among the community of heirs and the community is dissolved.

In many cases, however, the heirs are at odds. If, in such a case, the community of heirs cannot agree on the sale of a property belonging to the inheritance, the only option is a division auction - a foreclosure sale of the property.

Do communities of heirs have to pay taxes?

There is no joint tax return for the community of heirs. Taxation is individual. In other words: each co-heir must personally pay taxes on his share of the inheritance.

In the event of inheritance, inheritance tax may be due first. In addition, each heir may incur additional income tax on the current income between the inheritance and inheritance dispute. Important information for you as the heir: There are significantly fewer tax allowances available to you in terms of income tax.

How is the inheritance tax of the community of heirs calculated?

The starting point for the taxation of the community of heirs is the positive inheritance. And this is how you get to the positive genetic material:

Value of the entire estate - fixed costs = positive inheritance

The fixed costs that you can deduct include the estate liabilities, funeral costs, notary fees as well as costs for the executor and court costs.

The positive genetic mass is the starting point for calculating the inheritance. If the deceased has not stipulated any inheritance quotas in a will, the members of the community of heirs inherit according to the statutory inheritance quota.

For example, if three children inherit, the statutory inheritance quota is 1/3. Each child therefore receives a third of the positive genetic mass. This portion has to be taxed. Your own share of the total inheritance can be entered in the tax return either as a percentage or as a fraction.

However, whether inheritance tax is due depends on the inheritance tax class and the tax allowance due. For example, children are entitled to an allowance of 400,000 euros. Only the value that exceeds the tax exemption must be taxed on the basis of the individual inheritance share.

By the way:

As you can see, the allowances for close relatives are quite generous. If several people inherit at the same time, even larger inheritances can often pass from one to the other tax-free. It does not necessarily have to be given away in advance, especially since gift tax can also be due in such a case.

Is there income tax for the community of heirs?

Current income - for example the rental income from an inherited house - can also play a tax role for every co-heir.

In two cases, the co-heirs of a community of heirs are subject to income tax:

  1. Excess income: If, for example, an inherited house generates rental income, this is what is known as excess income. If this is the case, you are a co-heir to a partnership. The income is stated in the personal income tax return for each co-heir according to his share of the inheritance.
  2. Profit income: If a business is part of the estate, the community of heirs has income from profits. In this case, each co-heir pays tax on the profit proportionally based on the inheritance quota. This means, for example: If there are two heirs, each heir has to pay tax on 50 percent of the profits.

The following applies here: The community of heirs must submit a "declaration for the uniform and separate determination of the income" for this income. This means that the individual share of the income is taken into account in the personal income tax return.

By the way:

Our article can only give you a rough overview of the community of heirs and tax returns. Because the taxation of co-heirs depends on the individual case of inheritance. In the event of inheritance, seek tax advice from a tax advisor.

Please note that income tax relief associations are not allowed to advise you on this topic for legal reasons.

This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the consulting authorization according to ยง 4 No. 11 StBerG.