21.05.2025

Reform of the Property Tax: What Property Owners Need to Know Now

The reform of the property tax in Germany has redefined the rules of the game for property owners. With a fresh approach to calculation methods and variable rates, investors and private savers must prepare for new challenges. This article explores how the new regulations affect the amount of tax and what role the rates play in the final determination. Discover how these changes can impact your investment strategy and what steps are necessary to be optimally prepared.

The Restructuring of Property Tax Calculation: An Overview for Property Owners

Modern methods of calculating property tax that consider current market conditions.

The introduction of a new calculation method for determining property tax in Germany marks a significant turning point for property owners. After decades of applying outdated regulations from 1964 and 1935, the Federal Constitutional Court determined in 2019 that reform was essential. The previously deemed unconstitutional unit values resulted in unfair taxation, urgently needing an update. With the new method coming into effect in 2025, the tax will be calculated more fairly and current.

The calculation occurs in multiple stages, starting with determining the property tax value. This value is individually adjusted for each plot of land and takes into account factors such as land values, lot size, type of use, and type of building. With this approach, the reform aims to increase transparency and eliminate injustices created by static and poorly differentiated values.

Subsequently, the determined property tax value is multiplied by a tax coefficient. This has been lowered from previous regulations to counter a potential drastic increase in tax amounts. Finally, the rate established individually by each municipality is applied, which determines the final amount of tax.

For property owners, this means an adjustment to the new conditions. The improved assessment, based on individual conditions, ensures that the tax burden is distributed more equitably. The land value, established by local commissions, plays a fundamental role in determining the property tax value.

Another important aspect of the reform is the increased transparency and the associated requirements that require property owners to provide detailed data about their property. This information includes details like area, year of construction, and condition up to recent renovations. This improved data collection ensures more accurate assessments.

Although the reform is designed to be revenue-neutral, meaning total tax revenues should not increase, the individual tax burden will vary. Some property owners may have to pay more due to updated assessment bases, while others may receive relief from lower rates or lower land values.

In light of the new regulations, it is crucial for property owners to pay attention to deadlines for submitting necessary tax returns. Notices regarding the property tax value and tax coefficient will be sent starting in 2025, with no associated payment request. Property owners should check the new calculations and, if necessary, submit objections in a timely manner.

Preparing for this reform is essential to avoid unpleasant surprises. The introduction of new calculation methods also offers the opportunity to proactively address individual repercussions on one’s tax burden.

Understanding Rates: The Key to Property Tax Calculation for Owners

Modern methods of calculating property tax that consider current market conditions.

The importance of rates within the property tax calculation cannot be underestimated. These tools, established by municipalities, decisively determine how high the final tax obligation will be. Property owners must be particularly attentive, as rates can vary from year to year and require necessary adjustments. They are set annually by June 30 and directly influence the amount of property tax to be paid.

The basic formula for calculating property tax includes the tax amount, which is multiplied by the rate set by the municipality. This calculation generates the actual tax burden for the respective plot of land. A simple example of calculation makes this concept clear: with a tax amount of 31 and a rate of 400%, a property tax of 124 euros is obtained.

There are differences not only in the height of the rates but also in their scope of application. The distinction is made between property tax A for agricultural and forestry land, property tax B for developed and undeveloped land, and property tax C for undeveloped and construction-ready land. The latter type is primarily intended to prevent speculation on construction-ready land.

Despite the claim of revenue neutrality – meaning that total municipal revenues should not change with the reform – this does not imply that all property owners must pay the same amounts as before. The rates must be adjusted accordingly to achieve the desired financial equilibrium. This adjustment allows for comparison between the total property tax amount for 2024 and the new tax amounts for 2025.

Regional differences in rates are also an aspect that property owners must constantly monitor. While some regions follow the federal model, which includes land and building values, there are regions that apply their own models. Especially in large cities, rates are often higher than in rural areas, which directly impacts the tax burden.

The repercussions of the rates do not only affect property owners, but also involve tenants, as higher taxes may be transferred as additional costs if this is stipulated in the rental agreement. Understanding local rates and their repercussions is therefore an essential part of a property owner’s responsibility. Depending on the design of the rates, owners may need to adjust their budget and be informed in time about any planned changes.

Frequently asked questions

The property tax reform in Germany introduces a new method of tax calculation based on property values, adjusted individually for each plot of land, taking into account factors like land values, lot size, type of use, and building type. The property tax value is multiplied by a lowered tax coefficient and a rate established by each municipality to determine the final tax amount. The reform also requires property owners to provide detailed data about their properties to ensure more accurate assessments.

For property owners, the tax burden will be more equitable due to improved assessments based on individual conditions. However, the tax burden will vary – some property owners may have to pay more due to updated assessment bases, while others may receive relief from lower rates or lower land values.

The property tax value is determined for each plot of land based on factors like land values, lot size, type of use, and type of building. The property tax value is multiplied by a tax coefficient and then by the tax rate, established individually by each municipality, to determine the final amount of tax. The tax rate can change annually and directly influences the amount of property tax.

The rate, set by each municipality, is crucial in determining the final tax obligation. It can vary yearly, so property owners need to adjust accordingly. The rate differences apply to property tax A (agricultural and forestry land), property tax B (developed and undeveloped land), and property tax C (undeveloped and construction-ready land). Regional differences in rates can also impact the tax burden.

Property owners must adapt to the new conditions of the reform. They need to provide detailed data about their property and pay attention to deadlines for submitting necessary tax returns. Notices regarding the property tax value and tax coefficient will be sent from 2025. Property owners should check the new calculations and, if necessary, submit objections in a timely manner.