Calculating usufruct and right of residence: how the tax office determines the capital value

Usufruct (Nießbrauch) and the right of residence (Wohnrecht) are rights of use. The usufructuary may use a property and, as a rule, keep the rental income. The holder of a right of residence may live in it. If a property is given away or inherited subject to such a right, the new owner receives less than full ownership. The tax office takes this into account by calculating the value of the right as a capital value and deducting it for gift or inheritance tax.

The calculation is laid down in the German Valuation Act (Sections 14 to 16 BewG). It is the same for everyone and produces a value for tax purposes. It is not the same as the market value, i.e. the price an encumbered house would fetch on the market. More on this below.

The formula: annual value times multiplier

The capital value of a lifelong usufruct or right of residence is based on two figures:

• Annual value: what is the use worth per year?
• Multiplier: a factor from an official table that depends on the age and sex of the entitled person.

Capital value = annual value × multiplier.

Step 1: the annual value

For a right of residence, the annual value is usually the customary rent for the rooms the entitled person may use, multiplied by twelve months. For a usufruct over a let property, it is the rental income minus the costs the usufructuary bears. If the usufructuary lives in the property, the customary rent is used, as with a right of residence.

The annual value is capped: it may not exceed the tax value of the property divided by 18.6 (Section 16 BewG). With a tax value of EUR 600,000, that is around EUR 32,258 per year. If the customary rent is higher, only this maximum counts.

Step 2: the multiplier from the Federal Ministry of Finance table

The Federal Ministry of Finance (BMF) publishes the multipliers anew every year. They are based on the current life table of the Federal Statistical Office and a statutory interest rate of 5.5 per cent (Section 14 BewG). For gifts and inheritances from 1 January 2026, the table from the BMF letter of 21 October 2025 applies. What counts is the age reached on the day of the gift or the date of death.

Some values from the 2026 table:

• Age 60: women 13.832 · men 12.798
• Age 65: women 12.583 · men 11.444
• Age 70: women 11.107 · men 9.938
• Age 75: women 9.393 · men 8.282
• Age 80: women 7.490 · men 6.509

The younger the entitled person, the longer the right is expected to last and the higher the multiplier. Women have higher values than men because of their higher life expectancy. If a right depends on two people, for example a married couple, special rules apply to the choice of factor.

A worked example

In 2026, a 75-year-old mother gives her daughter a flat in Hamburg and reserves a lifelong right of residence in the entire flat. The tax office values the flat at EUR 600,000. The customary rent is EUR 1,200 per month.

• Annual value: EUR 1,200 × 12 = EUR 14,400. This is below the cap of around EUR 32,258.
• Capital value: EUR 14,400 × 9.393 = EUR 135,259.
• Taxable amount: EUR 600,000 minus EUR 135,259 minus the EUR 400,000 allowance gives EUR 64,700 after rounding. At 7 per cent, that is EUR 4,529 in gift tax.
• Without the right of residence, EUR 200,000 would be taxable and, at 11 per cent, the gift tax would be EUR 22,000.

The example is simplified and does not replace tax advice. Your tax adviser calculates your actual tax.

What if the entitled person dies early?

The multiplier assumes an average life expectancy. If the right ends through death much earlier, the tax is subsequently adjusted to the actual duration (Section 14 (2) BewG). How long the right must at least have existed depends on age: for example five years for people over 70 up to 75, and four years for people over 75 up to 80. For the recipient, this can mean an additional payment because the deduction becomes smaller. This only applies to the value from the table: if the value of the right was proven with an appraisal, there is no such subsequent taxation.

Tax value and market value are two different things

The capital value under the Valuation Act is a schematic calculation with a fixed interest rate and average life expectancy. It applies to gift and inheritance tax. Under the law, a different life expectancy or a different interest rate alone is not enough to use a different value (Section 14 (4) BewG).

If, on the other hand, the issue is the sale of a house with a right of residence, a compulsory share, equalisation of gains in a divorce, the division of an estate among heirs or proof of a lower property value under Section 198 BewG, the market value counts. The law defines it as the price that could actually be achieved on the market (Section 194 BauGB). That is why we do not just calculate but look closely at how buyers behave.

A buyer can neither use a house subject to a lifelong usufruct themselves nor collect the rent, and nobody knows how long the right will last. Financing is another factor: banks generally only lend if their land charge ranks first in the land register. A registered usufruct usually ranks ahead of it. Many buyers therefore deduct more than a purely mathematical calculation would suggest. This market perspective is reflected in our appraisals. The market value can therefore differ considerably from the capital value for tax purposes.

When you need an appraisal

• You want to sell or buy a house subject to a right of residence or usufruct.
• A compulsory share, equalisation of gains or the division among heirs is at stake.
• The tax value of the property itself seems too high to you.

Questions about the ten-year period for compulsory shares or claims by the social welfare office are legal questions. A lawyer advises you on these, and your tax adviser on tax. We value the property and the right.