Anyone who bequeaths their owner-occupied home to their spouse or children can transfer it completely tax-free under certain conditions—and in addition to the personal tax allowances. This special rule for the so-called family home is one of the most effective ways to avoid inheritance tax. However, the legislator ties the exemption to strict conditions: personal occupancy, a ten-year holding period and—in the case of children—a living-space limit of 200 square metres. We explain when the parental home remains tax-free within the family and which mistakes can cost you the exemption.
What Is the Tax Exemption for the Family Home?
The Inheritance Tax Act places the transfer of owner-occupied residential property within the closest family under special protection. This is governed by Section 13 (1) nos. 4b and 4c of the Inheritance Tax Act: If the spouse or children inherit the family home, its value remains completely tax-free under certain conditions.
The key point is that this exemption is granted in addition to the general tax allowances. Under Section 16 of the Inheritance Tax Act, a spouse already has a personal tax allowance of 500,000 euros, and each child has an allowance of 400,000 euros. The value of the family home is not counted against these allowances—it remains tax-free separately. This allows a family to transfer substantial assets without a tax burden.
The term “family home” refers only to the property in which the deceased actually had their centre of life. A holiday home, second home or rented apartment does not qualify. The property must also be located in Germany, the European Union or the European Economic Area.
Bequeathing the Family Home to a Spouse
For the surviving spouse or registered civil partner, the rule is most generous (Section 13 (1) no. 4b of the Inheritance Tax Act): The tax exemption applies without a value limit and without a size limit. Whether the house is worth 400,000 or 4,000,000 euros makes no difference—it remains completely tax-free.
The requirements are that
- the deceased used the residence for their own residential purposes until their death (or was prevented from doing so for compelling reasons, such as being placed in a nursing home),
- the surviving spouse immediately uses the property for their own residential purposes, and
- they lived there himself for at least ten years.
Bequeathing the family home to children
Children can also inherit the parental home tax-free (§ 13 para. 1 no. 4c ErbStG) – however, an additional limit applies here: only living space of up to 200 square metres qualifies. If the home is larger, the portion exceeding this limit is taxed proportionally.
An example: A child inherits a house with 250 square metres of living space and a value of 800,000 euros. 200 of 250 square metres qualify, i.e. 80 percent. Thus, 640,000 euros remain tax-free, while 160,000 euros are taxable. However, this amount can be offset against the personal allowance of 400,000 euros – as a result, no tax is often due.
The qualifying “children” include biological children and stepchildren. Grandchildren benefit from the exemption only if their parent – the deceased’s child – has already died.
The most important conditions at a glance
Whether spouse or child: These requirements must be met for the tax exemption to apply.
- Use by the deceased: The deceased must have lived in the property themselves until the inheritance was received. An exception applies only for compelling reasons such as the need for care.
- Moving in without delay: The heir must designate the home for their own use “without delay” – generally within six months of the inheritance.
- Ten years of personal use: The heir must live in the family home themselves for at least ten years (retention period).
- 200-square-metre limit for children: For children, the qualifying living space is capped; no limit applies to spouses.
- No sale and no letting: If the property is sold, gifted or rented out within the ten-year period, the exemption is lost.
The six-month deadline for moving in
The term “without delay” means “without culpable hesitation”. The Federal Fiscal Court has ruled that a period of six months after the inheritance is generally considered reasonable (BFH, judgment of 28 May 2019, II R 37/16). Anyone who moves in within this period is on the safe side.
If the heir moves in later, they must explain and credibly demonstrate why moving in earlier was not possible and that they were not responsible for the delay. How strictly the courts examine this is shown by a recent ruling of the Munich Fiscal Court dated 7 January 2026 (4 K 1677/24): An heir moved in only two and a half years after the inheritance because heinitially had to save money for the renovation. The court denied the tax exemption – purely financial considerations were not a sufficient reason for the delay.
When the tax exemption is subsequently lost
The exemption is initially only provisional. If the heir ends the personal use within the ten-year retention period – for example, by selling, renting out or moving out –, the tax exemption is lost retroactively. The tax office then taxes the entire acquisition.
However, there is an important exception: compelling reasons. Anyone who moves out for objectively compelling reasons does not lose the exemption. The Federal Fiscal Court has interpreted the term broadly in favor of heirs (judgments of December 1, 2021, II R 18/20 and II R 1/21): A reason is compelling not only when personal use is objectively impossible, but also when it is unreasonable. Recognized examples include the need for care or a serious health impairment that prevents independent household management in the family home. Mere considerations of expediency – such as moving for professional reasons – are not sufficient, however.
Advantages and disadvantages of the family home exemption
The tax exemption is attractive, but it binds the heir in the long term. Weigh up the following:
- Advantage – significant savings: The entire property value remains tax-free, in addition to the personal allowance.
- Advantage – protection of the spouse: The surviving partner can continue living in the shared home without a tax putting the property at risk.
- Disadvantage – ten-year commitment: You must live in the property yourself for a decade. An earlier sale or rental triggers subsequent taxation.
- Disadvantage – 200-square-meter limit: If children inherit a large house, part of the value remains taxable.
- Disadvantage – risk of reversal: If the circumstances of life change, the tax may become due retroactively – often in a substantial amount.
FAQ on inheriting the family home tax-free
Does the exemption apply in addition to the allowance?
Yes. The tax-free value of the family home is not credited against the personal allowance. Spouses (500,000 euros) and children (400,000 euros) retain their full allowance for the remaining assets.
What qualifies as a family home?
Only the property in which the deceased had their center of life until the end. Vacation homes, second homes and rented properties do not qualify.
What happens if the living area exceeds 200 square meters?
For children, the portion exceeding 200 square meters is taxed proportionally. There is no floor-area limit for spouses; here, the property remains tax-free regardless of its size.
Do I have to move in immediately?
You should use the property yourself without delay—generally within six months. If you move in later, you must prove that you were not responsible for the delay.
What applies if I have to move out before the ten-year period expires?
As a rule, the exemption is revoked retroactively. Exceptions include compelling reasons such as the need for care or serious illness, which make living in the house unreasonable. Moving out purely for convenience is not sufficient.
Can I also transfer the family home tax-free during my lifetime?
Yes—between spouses, the gift of the self-used family home can even be tax-free without a ten-year holding period (§ 13 para. 1 no. 4a ErbStG). However, this lifetime exemption does not apply to children.
Conclusion: Inherit tax-free, but plan ahead
Passing on the family home tax-free is one of the greatest levers in inheritance tax law—particularly in the case of valuable properties in sought-after locations. However, the exemption requires the heir to move into the property without delay and occupy it for ten years. Anyone who cannot or does not wish to comply with this obligation should factor in the subsequent taxation from the outset. In the case of larger estates or an unclear living situation, it is advisable to seek the advice of a specialist inheritance lawyer or tax adviser—so that the family home does not become an expensive tax liability.