German residents who enter Bausparvertrag are thus seeking to accumulate savings for the purchase or construction of a home with the possibility of taking out a fixed percentage mortgage. Customers who invest money receive their home on average 1.5 to 2 times faster than with conventional savings. If plans change, then instead of a house, bonus interest may be received, which, however, is taxed. But when? The Federal Tax Court knows the answer.
This type of investment offers more than interest rate savings. A savings contract for the construction, purchase or modernization of a home is a very flexible tool, since its components can be: a state bonus, employer bonuses and a loan from the “funds of construction”, under predetermined conditions.
With a housing savings contract, the saver regularly sets aside a small sum of money to use his capital in a few years. For example, to buy an apartment or a house.
Thanks to this agreement, three parties throw coins into the piggy bank of their own capital: the investor himself, the State and the employer.
Those who do not take out a loan from a building society after maturity often receive additional benefits in the form of additional interest. In this case, the interest rate of the construction savings contract is increased retroactively.
Since the bonus interest is usually only paid when the savings balance is paid off, a significant amount can accumulate. According to Daniela Karbe-Gessler of the Association of Taxpayers (Bund der Steuerzahler), this could quickly lead to a lump sum of savings in excess of 1,000 euros. Income above this amount is subject to final tax in the year of payment.
The Federal Tax Court confirms
In a specific case (Az.: VIII R 18/20), the Federal Tax Court confirmed this procedure. The contributor sued because his premium payment was fully taxed in the year of payment. He himself considered that the bonus interest, which appeared on the bonus account from year to year, should have been taxed in the corresponding year.
The judges disagreed with this. The interest statement on the bonus account indicates the intermediate balance – this is the maximum information for the client. The bonus itself is accrued only when the entire balance of funds in the savings account has been paid off, and before that it was not even available to the saver.
“Therefore, in the year of payment, it should be checked whether the corresponding tax exemption has been submitted to the construction company”, advises Daniela Karbe-Gessler. Those who allocate the amounts of their exemption determination(s) wisely can significantly reduce their tax liability.
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