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In principle, the sale of a property that has been held for less than ten years is subject to income tax. Exempt from this are properties that were used exclusively for the owner's own purposes between acquisition and sale and were thus occupied by the owner. Their sale is tax-free. Co-occupation by co-habitants such as family members has no effect on this.

When is it an exclusive own use?

On 19 July 2022 (IX R 20/21), the Federal Fiscal Court ruled for the first time on the question of whether it is still a case of exclusive owner-occupation if individual rooms in the property are rented out to third parties on a daily basis, and whether this affects the tax exemption of the sale of the property. 

In the case at hand, the taxpayer had rented out two rooms on the top floor of his otherwise owner-occupied property to trade fair guests on a daily basis, thereby generating income from renting and leasing. The property, including the rented rooms, was later sold and the total capital gain declared as non-taxable.

Proportionate taxation of the rented premises

The tax office nevertheless subjected the capital gain to taxation in the ratio of the rented rooms to the total area, but the tax court shared the taxpayer's view. The Federal Fiscal Court (Bundesfinanzhof, BFH) finally ruled that the capital gain was taxable in proportion to the ratio of the rented rooms to the total living space, as the criterion of use exclusively for own residential purposes was not met. Reference is made to the fact that there must be continuous own use. Furthermore, the BFH also commented on possible spatial or temporal de minimis limits and ruled them out entirely.

Property owners should therefore reconsider renting to third parties on a daily basis. Anyone who rents out their property to third parties for even one day a year risks a proportionate taxable capital gain.