How is the value of a usufruct calculated?

The capital value is the annual value of the benefit multiplied by a multiplier (§ 14 BewG). The annual value is usually the rent saved or the rental income per year, minus the costs the beneficiary bears. For lifelong rights, the multiplier depends on age and sex. Example: a 65-year-old woman with an annual value of €14,400 has a multiplier of 12.583 for valuation dates from 2026, so the capital value is about €181,195.

Which multipliers apply in 2026?

For valuation dates from 1 January 2026, the table from the Federal Ministry of Finance letter of 21 October 2025 applies. It is based on the Federal Statistical Office's life table 2022/2024 and an interest rate of 5.5%. Some values: man aged 60: 12.798, woman aged 60: 13.832, man 70: 9.938, woman 70: 11.107, man 80: 6.509, woman 80: 7.490. What counts is the date of the gift or death, not the date of the tax return.

What does the cap under § 16 BewG mean?

The annual value may be at most the property value divided by 18.6. With a property tax value of €300,000, that is about €16,129 per year. Anyone with higher rental income can still only use this maximum for the valuation. The rule prevents a right of use from being worth more than the property itself on paper. The calculator checks the limit automatically.

How does a usufruct reduce gift tax?

Anyone who gifts a property while reserving the usufruct or a right of residence is economically giving away less. The capital value of the right is therefore deducted from the value of the gift. Example: house €450,000, mother aged 65, €1,200 monthly rent: capital value about €181,195; the gift falls to about €268,805 and thus below the €400,000 allowance for a child. Without the reservation, the €50,000 above the allowance would cost €3,500 in tax.

What happens if the beneficiary dies early?

Then the tax can be corrected on application under § 14(2) BewG, i.e. recalculated based on the actual duration. This only applies within fixed periods that depend on age on the valuation date: for example at most 7 years for over 60 to 65, 6 years for over 65 to 70, or 4 years for over 75 to 80. For the recipient this usually means additional tax, because the deduction becomes smaller.

Is a right of residence valued the same way as a usufruct?

Yes, the method is the same: annual value times multiplier, capped under § 16 BewG. The difference is the annual value. For a right of residence, the local rent for the rooms the beneficiary may occupy is used. For a usufruct, the entire yield counts, including rental income from let flats. A right of residence in a granny flat is therefore usually worth far less than a usufruct over the whole house.

How is a fixed-term usufruct valued?

For rights over a fixed number of years, the multiplier from Annex 9a to § 13 BewG applies, e.g. 7.745 for 10 years or 12.279 for 20 years. Because a person's usufruct or right of residence ends at death at the latest, § 13(1) sentence 2 BewG says the value may not exceed the lifelong value. For an 88-year-old man with a 10-year term, the lower lifelong multiplier of 3.778 therefore applies.

Which property value should be used?

What counts is the property tax value under the Valuation Act, determined by the tax office for gift or inheritance tax. It can differ from the purchase price or market value. If you have an appraisal in which the usufruct has already reduced the value, the right may not be deducted again (§ 10(6b) ErbStG). For a first estimate, you can use a realistic market value.

Gifting Property with a Reserved Usufruct: How Gift Tax Falls | Usufruct Value Calculator

Gifting property while reserving the usufruct is one of the best-known ways in Germany to pass real estate to the next generation tax-efficiently. The parents transfer ownership but keep the right to use the house or collect the rent. Because the recipient receives an encumbered property, the taxable value falls.

How the deduction works

Under § 10(1) ErbStG, the taxable amount is the recipient's enrichment. Anyone receiving a house subject to a usufruct gains a smaller economic benefit. The capital value of the usufruct is therefore deducted from the property tax value. It is the annual value times the multiplier under § 14 BewG. For gifts from 1 January 2026, the table from the Federal Ministry of Finance letter of 21 October 2025 applies.

Worked example with allowance

A 68-year-old father gives his daughter a flat with a property tax value of €600,000 and keeps a lifelong usufruct. The local net rent is €900 per month.

1. Annual value: €10,800

2. Multiplier, man aged 68: 10.561

3. Capital value: €114,059

4. Value of the gift: €600,000 − €114,059 = €485,941

5. After the €400,000 allowance and rounding down to full €100: €85,900 taxable

6. Tax at 11%: €9,449

Without the usufruct, €200,000 would be taxable and the tax would be €22,000. The reservation therefore saves €12,551.

Use the allowances every ten years

Allowances are available again every ten years for each donor and recipient. Several gifts within ten years are added together. If you want to transfer larger assets, you can therefore gift property in stages, each time with a reserved usufruct. The Inheritance Tax Calculator shows the effect of staggered gifts in its gift mode.

Let residential property: only 90% deductible

If the property is let for residential purposes, 10% of its value is exempt under § 13d ErbStG. In return, debts and burdens are not deductible to the extent they relate to the exempt portion (§ 10(6a) ErbStG). The capital value of the usufruct is then only deducted at 90%. The calculator takes this into account when you tick the corresponding box.

No double counting

If the property value is proven by an appraisal and the usufruct has already reduced that value, it may not be deducted again. This is laid down in § 10(6b) ErbStG. Check how your appraisal is structured.

Practical pitfalls

1. Early death: if the beneficiary dies within the periods of § 14(2) BewG, the tax can be corrected on application. For the recipient this usually means additional tax.

2. Waiving the usufruct: if the parents later waive the usufruct free of charge, this can be a further gift.

3. Rights of reversion: many contracts include rights to reclaim the property, for example on sale or insolvency of the recipient. They are useful but should be drafted carefully.

4. Need for care: anyone who later needs social benefits must expect the social welfare authority to reclaim gifts made within the last ten years.

Conclusion

A reserved usufruct often reduces gift tax considerably, especially when the donors are still relatively young. The older the beneficiary, the smaller the multiplier and the smaller the deduction. Work out your capital value with the Usufruct Value Calculator and discuss the arrangement with a tax adviser or notary before signing. This page is not tax advice.

Gifting Property with a Reserved Usufruct: How Gift Tax Falls

How the deduction works

Worked example with allowance

Use the allowances every ten years

Let residential property: only 90% deductible

No double counting

Practical pitfalls

Conclusion

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