Berlin – The Finance Committee of the Bundesrat is calling for the abolition of the current ten-year holding period for real estate sales. Under this proposal, gains from the sale of rented houses, apartments, and land would remain subject to taxation, even after decades of ownership. Currently, owners are generally permitted to sell such properties tax-free once a ten-year period has elapsed. The Bundesrat is scheduled to deliberate on this planned change—part of the 2027 income tax reform—on October 16, 2026. The proposed transitional arrangement is particularly contentious, as it could potentially apply to existing real estate investments and trigger significant additional tax liabilities. However, no formal legislative bill has been introduced as of yet.
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Real estate sales to remain permanently taxable in the future
Under current law, the tax liability on gains from the private sale of real estate generally ends after a ten-year holding period. This provision is set out in Section 23 of the German Income Tax Act. If an individual holds a rented property for longer than this period, they can subsequently sell it without incurring income tax on the capital gain. Conversely, if the property is sold within the ten-year window, the tax authorities levy income tax on the gain at the owner’s personal income tax rate. For many private landlords, this rule serves as a cornerstone of their long-term wealth planning.
The Finance Committee intends to abolish this time limit entirely. It justifies this move by pointing to the disparity in how real estate and other capital investments are taxed. While gains from stocks and investment funds remain taxable indefinitely, real estate has—until now—enjoyed a special, time-limited status. However, owning real estate differs significantly from holding securities. Property owners face substantial maintenance costs, finance modernization projects, and often maintain their investments over the course of decades. Consequently, the proposed change would not only affect short-term speculative activity but would also impact private landlords with a long-term investment horizon.
Transitional provision could capture real estate gains that have already accrued
The proposed cut-off date is particularly problematic. Owners would retain their current tax-exempt status if the ten-year holding period has already elapsed by the time the new law is enacted. Conversely, those who have owned their property for only nine years at that point could permanently lose this tax advantage. In such a case, even a sale occurring ten years later would, in principle, be subject to income tax. Consequently, the new regulation could retroactively diminish the economic value of prior investment decisions.
Furthermore, there is the planned taxation of value appreciation that occurred in the past. The committee does not provide for any distinction between gains accrued before and after the legislative change. As a result, a significant portion of value appreciation that has already taken place could become subject to taxation. For instance, on a taxable capital gain of 200,000 euros—assuming a 40 percent tax rate—this would result in an income tax liability of 80,000 euros. Under current law, such a gain could remain entirely tax-exempt if the property were sold after the ten-year holding period. It is precisely this transitional provision that is likely to become a key point of contention as the legislative process continues.
Tax exemptions for owner-occupied properties to be restricted
Owner-occupied residential property is set to remain eligible for tax benefits upon sale; however, the Finance Committee intends to introduce stricter requirements. Currently, under certain conditions, it is sufficient for the owner to have occupied the property during the year of the sale and the two preceding calendar years—meaning that an actual occupancy period of as little as one year and two days could suffice. In the future, a minimum of 36 consecutive months of occupancy would be required. This period of use would have to end no earlier than six months prior to the sale. Individuals who have continuously occupied their own property since acquiring it would remain exempt from tax upon its sale. The proposal also includes special provisions for cases of separation or divorce. Furthermore, allowing children—for whom the owner receives a child benefit—to reside in the property would continue to be classified as “owner-occupation.” In contrast, no such exceptions are planned for private real estate investors; they would generally be required to pay tax on any gains from a future sale, regardless of how long they held the property.
Higher tax burden could shrink the supply of real estate
Abolishing the ten-year holding period would also have implications for the real estate market. In the future, owners would have to surrender a larger share of their capital gains to the tax authorities. Consequently, it might become more economically advantageous to retain rented properties for longer or to transfer them within the family. This could result in fewer existing residential properties reaching the market—a development that would be particularly problematic in metropolitan areas, where housing is already in short supply.
The willingness of private landlords to invest could also suffer. High construction costs, financing expenses, and regulatory requirements are already weighing on the economic viability of many real estate projects. Imposing additional taxes on long-term appreciation would further diminish expected returns. While this could generate extra tax revenue for the state, it would simultaneously make investments in rental housing less attractive. Whether this would force buyers to pay higher prices, however, depends on specific market conditions; in weaker markets, it is primarily the proceeds realized by the owners that might decline.
Bundestag Rejects Similar Tax Proposals – Bundesrat to Reconsider
The planned abolition of this tax exemption is politically controversial. As recently as October 8, 2026, the Bundestag rejected a comparable legislative proposal put forward by the Green Party; 446 members of parliament voted against the measure, while 131 voted in favor. The CDU/CSU, SPD, and AfD all withheld their support. Nevertheless, the Finance Committee of the Bundesrat is now recommending that such a change be included in the Income Tax Reform Act of 2027.
On October 16, the federal states (Länder) will decide whether to incorporate this demand into their official position. However, approval by the Bundesrat would not, in itself, constitute a change in the law. For that to happen, the Bundestag—among others—would have to vote to abolish the existing ten-year holding period. Until then, the tax-free sale of real estate remains possible, provided the statutory holding period has been met. This renewed political initiative, however, signals that a cornerstone of private real estate investment—one established for decades—is now up for debate.
Author: Blackout News
Sources: t-online (15.10.26) – Alsterwert (14.10.26) – Deutscher Bundestag (08.10.26) – PSP (07.10.26)