Scope of the inheritance tax exemption for a family home

The inheritance tax exemption for a family home only covers an appropriate area of land if the building is located on a particularly large plot of land.

There is an exemption from inheritance tax for a family home that is also used by the heir. However, according to a ruling by the Lower Saxony Tax Court, this tax exemption only covers the floor area of the parcel of land on which the family home is built or, in the case of larger parcels of land, an appropriate accessory area. In the case in dispute, the house stood on one of several parcels of land that were combined into one property in the land register and therefore all belonged to the estate. However, the tax office did not grant the tax exemption for the entire property, but only for the one of the five combined parcels on which the building stood. The court ruled that the exemption regulation must be interpreted restrictively for constitutional reasons because close relatives to whom the exemption regulation applies already benefit from high tax allowances anyway and otherwise an unconstitutional double benefit could occur.