Inheritance tax allowance for rented residential property

The preferential treatment for real estate rented out for residential purposes only exists if the testator already had a concrete intention to rent out the property and started to implement it.

Inheritance tax is reduced by 10 % for real estate rented out for residential purposes. However, because the law does not clearly regulate what "rented out" means, the Federal Fiscal Court had to decide. Accordingly, the tax bonus does not exist if the rental is first operated by the heir. The tax benefit therefore ceases to apply if the inherited property is neither rented out nor intended to be rented out at the time the inheritance tax arises. The property is intended to be rented out for residential purposes if the testator had a specific intention to rent out the property, the implementation of this intention has begun and this can be proven on the basis of objectively verifiable facts.