The Bundesfinanzhof (BFH, Federal Fiscal Court) dismissed as unfounded a complaint by a Finanzamt (German tax office) against the denial of leave to appeal on points of law in proceedings concerning the inheritance tax exemption for a family home (BFH, decision of 27 May 2026 – II B 41/25). The decisive issue is whether the heir designated the property for owner-occupation without undue delay. The six-month period developed for this purpose in the case law does not constitute a rigid time limit. Instead, an overall assessment of the circumstances of each individual case remains determinative.
Tax exemption for an inherited family home
Subject to the requirements of § 13 Abs. 1 Nr. 4c ErbStG (German Inheritance and Gift Tax Act), a family home occupied by the parents may pass to a child free of inheritance tax. A key requirement is that the beneficiary designate the property for use as their own residence without undue delay.
Without undue delay means that the decision must be made and implemented without culpable delay. The case law has generally established six months as an appropriate period. However, this does not mean that every instance of actual occupancy occurring later necessarily precludes the tax exemption.
Overall assessment rather than a rigid time limit
As the court responsible for findings of fact, the Finanzgericht (Fiscal Court) assesses whether the property was designated for owner-occupation in due time by considering all the circumstances. The intention to occupy the family home is a matter of internal intent. It must therefore be inferred from objectively discernible facts.
The following circumstances may be particularly relevant:
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The beneficiary took specific steps at an early stage to prepare for personal use of the property.
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They contacted an energy consultant or contractors regarding the work required.
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Actual occupancy was delayed due to extensive work on the property.
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An existing right of residence initially restricted the legal or practical ability to use the property.
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The decision to use the property can be substantiated by objective actions taken within the relevant period.
The date of occupancy alone is therefore not decisive for the tax exemption. What also matters is when the decision to occupy the property was made and whether its subsequent implementation was delayed by circumstances for which the beneficiary was not culpably responsible.
Right of residence and renovation delayed occupancy
In the case at issue, the son and his wife did not move into the inherited parental home until almost two years after the date of death. The mother continued to hold a right of residence and occupied the property from January 2022 until she moved into a care facility in June 2022.
Extensive renovation work was subsequently carried out. However, preparations for this work had already begun before the mother left the house. The son and his wife had contacted an energy consultant and other contractors as early as April 2022.
Inconsistent information regarding address and registration
In September 2022, the son registered the family home as his address retroactively with effect from 1 July 2022. His wife changed her registration on 15 November 2022, retroactively with effect from the beginning of that month. Nevertheless, they did not actually move in until the end of 2023.
In his inheritance tax return filed in August 2022, the son had still stated his previous address. Nor did he claim the tax exemption for the family home at that time.
Administrative appeal against the amended inheritance tax assessment
In the initial inheritance tax assessment, the Finanzamt first applied an estimated real property value. After the value relevant for inheritance tax purposes had been assessed separately, the authority amended the assessment and increased the inheritance tax due.
The son lodged an administrative appeal against the amended assessment. In this context, he also applied for the tax exemption for the inherited family home.
Finanzgericht upheld the tax exemption
In its judgment of 14 May 2025 – 3 K 80/24, the Niedersächsisches Finanzgericht (Lower Saxony Fiscal Court) ruled in the son’s favor. In its assessment, the period for designating the property for owner-occupation without undue delay does not begin until the heir is legally able to move into the property. This may require, in particular, that conflicting rights held by a person entitled to reside in the property are no longer being exercised.
The defendant Finanzamt challenged the decision by filing a complaint against the denial of leave to appeal on points of law. The BFH dismissed the complaint as unfounded. Consequently, no appeal on points of law took place, and the complaint proceedings have concluded.
Delayed occupancy did not preclude the exemption
For the BFH, the decisive factor was that the question of whether the property had been designated for owner-occupation without undue delay depends on an assessment of the specific facts. The six-month period provides an important point of reference but is not an absolute cut-off period.
In the case at issue, the decision to occupy the property personally had become objectively discernible within this period. In particular, the contacts established with an energy consultant and contractors as early as April 2022 supported the conclusion that the property was to be prepared for use as the son’s own residence. The fact that the renovation work delayed actual occupancy until the end of 2023 therefore did not preclude the tax exemption.
Significance of delays caused by the condition of the property
If a family home cannot be occupied within six months, the reasons for the delay are decisive. Extensive work on the property that is necessary to make it habitable may justify moving in at a later date. The decision to occupy the property must nevertheless have been made in due time and must be ascertainable from objective circumstances.
By contrast, the mere intention to possibly move into the property at a later date is not sufficient in itself. Specific facts demonstrating a firm decision to use the property as one’s own residence are required.
Effect of a right of residence remains unresolved
In its decision, the BFH did not conclusively determine whether an existing right of residence generally postpones the commencement of the period relevant to the decision to occupy the property personally. Such a determination was not necessary in the specific proceedings.
The mother had moved into a care facility in June 2022, within six months of the date of death. At that time, her right of residence no longer prevented the son from deciding to use the property as a family home. It therefore remains unresolved whether, in a different factual scenario, the BFH would uphold the Niedersächsisches Finanzgericht’s position regarding the commencement of the period.
Individual circumstances determine the inheritance tax exemption
The decision makes clear that the tax treatment of an inherited family home does not depend solely on the date of actual occupancy. The decisive factors are the timing and demonstrable firmness of the decision to occupy the property personally, as well as the reasons for any delay in implementing that decision. Rights of residence, renovation work, changes of registered address, and other objective actions may carry different weight in this assessment.
The requirements of § 13 Abs. 1 Nr. 4c ErbStG must therefore be assessed based on the specific facts of the case. MTR Legal assists clients with questions concerning the tax treatment of an inherited family home as part of its tax law advisory services.
