Capital transfer to children: save taxes with the family

Save taxes with the family

Attention parents! Have you exhausted your saver allowance on investment income and still want taxes save up? We have a real tax saving opportunity for you here.

Use your children’s allowances

you Saver allowance of 801 euros (or 1,602 euros for married couples) is exhausted? Simply transfer your capital investments to your children. As a result, the interest will then accrue to your children. But: they have their own savings allowance of 801 euros. And up to this height you can on behalf of your minor children separate exemption orders To give. In this way, the tax-free allowances for children can be used in the family network.

In the case of children, interest income not only remains tax-free in the amount of the saver’s tax-free allowance, but also up to the amount of the basic tax-free allowance (2017: € 8,820; 2018: € 9,000) and the special lump sum (€ 36), in total up to 9,657 euros!

Pay attention to strict segregation of assets!

The ideal case would surely be if you could simply transfer the interest to your child and the capital assets could remain your property. Unfortunately, this is not possible. In order for the tax office to allocate the investment income to the child for tax purposes and no longer to you, you must correct the Transfer of income to the child and strictly segregate assets in administration.

Draw up a contract

An important prerequisite for a gift: The parents must regulate them effectively – ideally with a contract so that they have proof of the tax office. You also need the Make a gift as agreed.

For that you should open an account or custody account, in the name of the child. As parents, you are then entitled to dispose of the child until it is of legal age. However, you are not allowed to use the capital and its income for your own purposes.

No gift tax up to 400,000 euros

A gift tax does not apply to a gift of up to EUR 400,000 per child. Such a care is Tax-free every ten years. If both parents have the appropriate assets, even each parent can benefit use. If the gift is given early at least ten years before the inheritance, the later inheritance remains up to this allowance also free from inheritance tax.

No problem with child benefit

With the transfer of capital to your children, they now achieve this own income. As long as they are still a minor, the amount of income does not play a role in child benefit and child allowance. However, the income is checked with the non-contributory statutory health insurance and with the BAföG.

Easy transfer of wealth … or not?

The transfer of savings, securities or entire custody accounts to a child easily possible in terms of banking – and until 2008 the tax office mostly did not notice this. The risk has apparently become even less since 2009. Because capital gains no longer have to be stated in the tax return. Therefore, the tax office no longer learns if parents now have less taxable capital gains.

But be careful: more control through tax offices

In the event of a transfer of securities or securities to another person, a transaction against payment is assumed for tax purposes. As a result, the transfer of capital is treated as a sale. The issuing bank is fundamentally obliged to pay the possible profit Flat rate tax of 25 percent withhold.

The bank is only obliged to withhold the flat tax if the Capital gains actually taxable would. This means that the new law only applies to the transfer of securities that have been acquired since 2009. In addition, there is no taxable capital gain if, for example, a savings book is transferred to the child (BMF letter of January 18, 2016, item 163).

Transfer of securities accounts or securities

Do you want to bequeath or give your child a deposit or securities? Then you should definitely inform the bank. Because that counts as free transfer. The bank does not withhold any flat tax. BUT the bank is obliged to report the donation or inheritance to the tax office.

If you fail to notify the bank of the donation and consequently the bank withholds the 25 percent withholding tax, you have the option of doing so correct in your tax return. You can therefore attach the declaration that the gift is a gift, together with the bank’s tax certificate, to your tax return. Then the wrongly withheld withholding tax will be deducted from your tax liability and reimbursed if necessary.