Often a real estate purchase contract is designed in such a way that it quantifies both the property and the building, but also inventory and possible maintenance reserves as an equivalent for a lump sum total purchase price. A great tax saving can be achieved by cleverly designing the purchase contract. On the one hand, you should distinguish between the units of land and building in order to ensure the highest possible depreciation of the purchase price for the building. Furthermore, you should also record the inventory as your own position in order to enable depreciation here as well. In this case, the depreciation can also be carried out much faster than in the case of the depreciation of the remaining property. In addition, you avoid a burden on the inventory with real estate acquisition tax. As a fourth position, you separate the previously saved maintenance reserve. After all, it is also unnecessary to pay real estate transfer tax for such a capital item.

From our practice in advising our clients, we know that real estate purchase contracts are in most cases drawn up via a single, flat-rate purchase price. After all, many people also consider a property as a self-contained unit. So why should you divide the purchase price? Therefore, it is easy to understand that only a few affected persons in this situation consider a division of the purchase price in the real estate purchase contract.

But there are four good reasons to make a simple division of the individual items land, buildings, inventory and maintenance reserves (in the case of condominiums) in the real estate purchase contract. With this article, we want to show you how you can save taxes – both on the real estate transfer tax and on your future income tax.

2nd distinction between land and buildings

First of all, it is important that you make a distinction between the land and the building in the real estate purchase agreement. Attention is paid to the specificity of the depreciation between the land and the building. While the property is not taken into account in the depreciation, a depreciation on the purchase price is quite possible for the building. Although the real estate transfer tax is provided on the sum of the purchase price, you can claim a significant share for the building by clever design and write it off later. So the advantage is that it gives you an opportunity that allows the buyer to write off the purchase price to a large extent.

Incidentally, depending on the age and type of use, the depreciation of buildings takes place at a regular rate of 2%, 2.5% (for older buildings), or even 3% (for operational use). The higher the rate, the faster you can use the tax advantage.

A property usually also includes furnishings that are not an essential part of the property. For example, these can be lamps, fitted kitchens, wall cabinets or elevators. So if you occupy such items of the inventory in your own area with their own value when buying the property, then you even get two tax advantages.

On the one hand, the inventory is not part of the property when seen knitted. So there is no real estate acquisition tax on the purchase of the inventory. However, if, as initially described in the normal case, you agreed on a single total purchase price for the property in the purchase contract, then you would pay unnecessary taxes on the share that is attributable to the inventory.

The second advantage is the ability to write off the purchase price of the inventory. The depreciation rate is even significantly higher than the 2-3 % for the building.

4. list maintenance reserves in the real estate purchase agreement

When selling condominiums, the maintenance reserve previously saved under legal regulations is often part of the purchase price. However, if only a lump sum purchase price is agreed to purchase the property in the purchase contract, then this also leads to an unnecessarily high tax base for the real estate acquisition tax, which you should avoid. Similar to the inventory, there is no real estate transfer tax on the maintenance reserve. After all, a balance as a maintenance reserve is a capital value and not a property. So also avoid the unnecessary payment of real estate acquisition tax by listing the maintenance reserve separately in the real estate purchase contract.