German Inheritance Tax (Erbschaftsteuer): Allowances, Rates and Exemptions

German inheritance tax, known as Erbschaftsteuer (often searched as Erbschaftssteuer with an extra s), is charged on what each beneficiary receives rather than on the estate as a whole. That single design choice explains why two people who inherit from the same estate can face very different bills. The amount owed turns on three things: how closely the beneficiary was related to the deceased, the value of what they received, and which allowances and exemptions apply to that particular transfer.

This page explains the three tax classes, the tax free allowances under § 16 ErbStG, the rate bands under § 19 ErbStG, the main exemptions for spouses, children and family homes, and how gifts made in the ten years before death are folded into the calculation. For lifetime giving as its own topic, see gifts and gift tax.

Information last verified on 19 July 2026. This page provides general legal information and does not constitute legal advice in an individual case.

Who owes German inheritance tax

Erbschaftsteuer applies whenever a German resident inherits, and it can also apply to non-resident heirs who inherit German situated assets such as real estate. It is collected from the beneficiary rather than from the estate, which is why German law asks who received what before it asks how much the whole estate is worth. Each beneficiary calculates their own tax position separately, using their own allowance and their own tax class.

A spouse, a child and a family friend inheriting shares of the same estate each face a different calculation. That is the single most important thing to understand before looking at any of the figures below.

The three tax classes: § 15 ErbStG

§ 15 ErbStG sorts every beneficiary into one of three Steuerklassen based on their relationship to the deceased, or, for a gift, to the donor. The class does not depend on how much is inherited, only on who the beneficiary is.

Tax class I covers spouses and registered life partners, children and stepchildren, and the further descendants of those children (so grandchildren and great grandchildren too), plus parents and grandparents when they inherit on death.

Tax class II covers parents and grandparents when they receive a lifetime gift rather than an inheritance, siblings and their children, stepparents, parents in law and children in law, and a divorced spouse or a former registered partner.

Tax class III covers everyone else: unmarried partners, friends, cousins, and unrelated beneficiaries or organisations. This class also governs purpose bound gifts that are not tied to a specific personal relationship.

Tax free allowances: § 16 ErbStG

Before any rate is applied, each beneficiary subtracts a personal allowance from the value they received. § 16 ErbStG sets these allowances by relationship, and the figures have not changed since 2009.

The 400,000 EUR child's allowance applies per parent. A child who loses both parents can use the full allowance against each parent's estate separately, because each parent is treated as a separate donor for this purpose.

Tax rates: § 19 ErbStG

Once the allowance is subtracted, whatever remains is taxed at a rate set by § 19 ErbStG. The rate depends on both the tax class and the size of the taxable amount, and it applies through the bands shown below. Klasse I covers spouses, children and grandchildren; Klasse II covers siblings, nieces, nephews, stepparents and in laws; Klasse III covers everyone else.

Each rate in this table applies to the whole taxable amount that falls at or under that threshold, not only to the slice inside the band. That means landing just over a threshold can look like it drags the entire sum into a much higher rate, which is exactly the problem the hardship adjustment below exists to fix.

The hardship adjustment: § 19 Abs. 3 ErbStG

§ 19 Abs. 3 ErbStG stops a threshold crossing from producing a punitive result. Without it, a taxable amount that lands just 1 EUR over a threshold would face the higher rate on the entire sum, not only on the 1 EUR that pushed it over.

Instead, the extra tax caused by moving into the higher band is capped at a set share of the amount by which the taxable sum exceeds the previous threshold (half for most crossings, and three quarters where the resulting rate exceeds 30 percent, which in practice means the three highest crossings and only in Steuerklasse II and III). In practice this means the tax due near a threshold rises gradually rather than jumping, so the rate table above is best read as a guide to the pressure at each band rather than as a cliff edge.

Three worked examples

A spouse inheriting a modest estate

Say a surviving spouse inherits assets worth 350,000 EUR, none of it the family home. The spousal allowance under § 16 ErbStG is 500,000 EUR, so the full amount sits inside the allowance and no inheritance tax is owed. This is the common outcome for a surviving spouse in an average sized estate, though a larger estate, or one where the family home exemption below does not fully apply, can still produce a bill.

A child inheriting above the allowance

Say a single child inherits 550,000 EUR from a parent, with no family home involved. The child's allowance under § 16 ErbStG is 400,000 EUR, leaving 150,000 EUR taxable. That amount falls in the first band of the § 19 ErbStG table, up to 300,000 EUR, taxed at 11 percent in tax class I, producing tax of roughly 16,500 EUR before any further relief such as the pension allowance described below.

A tax class III beneficiary: an unmarried partner or friend

Say an unmarried partner, who never registered the partnership, inherits 300,000 EUR. Because the couple never registered, the partner falls into tax class III with only a 20,000 EUR allowance, leaving 280,000 EUR taxable. Under the § 19 ErbStG table that amount sits in the first class III band, up to 300,000 EUR, taxed at 30 percent, producing tax of roughly 84,000 EUR.

Compare that to a registered spouse inheriting the identical 300,000 EUR, who would owe nothing at all because the sum sits entirely inside the 500,000 EUR spousal allowance. That gap, on the exact same amount of money, is why unmarried couples in Germany so often turn to lifetime gift planning or a will built around the family home exemption rather than relying on the default rules.

The pension allowance: § 17 ErbStG

On top of the general allowance, a surviving spouse or child can claim a further Versorgungsfreibetrag under § 17 ErbStG, meant to offset the loss of a maintenance claim against the deceased.

A surviving spouse or registered partner can claim up to 256,000 EUR. A child's allowance depends on their age at the time of inheritance: 52,000 EUR under age 5, 41,000 EUR from age 5 to under 10, 30,700 EUR from age 10 to under 15, 20,500 EUR from age 15 to under 20, and 10,300 EUR from age 20 to under 27.

Each figure is reduced by the capitalised value of any survivor pension the beneficiary already receives tax free from another source, such as a statutory or occupational pension. A spouse who already receives a substantial tax free widow's or widower's pension may find this allowance reduced to very little.

The family home exemption: § 13 Abs. 1 Nr. 4b and 4c ErbStG

A family home can pass tax free on top of the ordinary allowance, but the conditions differ sharply between a spouse and a child.

A surviving spouse or registered partner inherits the home the deceased used as their residence completely tax free, with no size limit, provided the survivor moves in, or was already living there, and keeps using it as their own home. Children and grandchildren of a predeceased child receive the same exemption but only for up to 200 square metres of living space; any space beyond that is taxed in the ordinary way.

Both versions of the exemption are withdrawn retroactively if the beneficiary stops using the property as their own home within ten years, unless a compelling reason prevents them from continuing to live there, such as death or a genuine need for long term care. A beneficiary who sells or rents out the home in year six, for example, can expect the Finanzamt to reassess the exemption and issue a bill covering the period that has already passed.

Gifts made before death also count: § 14 ErbStG

§ 14 ErbStG adds together every gift a beneficiary received from the same person in the ten years before that person's death, and taxes the combined total using a single allowance and a single rate. The tax already paid on the earlier gifts is then credited against the combined bill, so the same money is not taxed twice, but using up the allowance early through lifetime gifts does reduce what is left to use at death.

This ten year lookback is the central reason lifetime gift planning matters so much in Germany, and it is covered in full on the gifts and gift tax page, including how the clock resets and how it interacts with the compulsory share rules that protect other heirs.

Filing and deadlines

§ 30 ErbStG requires the beneficiary to report an inheritance or gift to the responsible Finanzamt in writing within three months of becoming aware of it. Courts, notaries and registry offices that already report the relevant facts to the tax office can relieve the beneficiary of part of this duty, and a gift a notary has already certified generally does not need a separate report from the beneficiary. The relief on a death transfer is narrower than it first looks. § 30 Abs. 3 Satz 1 ErbStG withdraws it where the estate includes real property, business assets, shares in a company, or foreign assets, which describes a large share of real estates. If a house is in the estate, assume the report is still owed.

The Finanzamt then decides, based on that report and any further documents it requests, whether a full tax return is required, and issues the assessment from there. Missing the three month reporting window does not cancel the tax owed and can expose the beneficiary to separate penalties, so it should be treated as a hard deadline even where the final valuation will clearly take longer to work out.

Business assets: a relief currently under constitutional review

§§ 13a to 13c ErbStG let business assets, and qualifying company shareholdings, pass with an 85 percent, or under stricter conditions a full 100 percent, reduction in taxable value. These reliefs depend on keeping the business running and maintaining its payroll for several years after the transfer, and they exist to stop inheritance tax from forcing the sale or breakup of an operating business.

As of 19 July 2026, the Bundesverfassungsgericht has a case pending, 1 BvR 804/22 together with 1 BvF 1/23, on whether these business asset reliefs create an unfair gap with the tax faced by beneficiaries of ordinary private assets, in a way that could breach Art. 3 Abs. 1 GG. A ruling had been expected at some point in 2026 but had not been handed down as of this writing. If the court strikes down the current rules, it is the business asset reliefs in §§ 13a to 13c that would be affected, not the personal allowances under § 16 ErbStG described earlier on this page. Anyone relying heavily on the business asset relief for succession planning should follow this case closely rather than assume the current rules are permanent.

Related reading: writing a will in Germany, intestate succession, the compulsory share, and disclaiming an inheritance. For a wider view of the legal system, see German law explained.

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