Property tax – what do owners need to know now?

The calculation of property tax has been reformed because the Federal Fiscal Court ruled the previous method unconstitutional. As a result, approximately 35 million properties will need to be reassessed by the end of 2024. While the new property tax will not be levied until January 1, 2025, all property owners must submit a separate property tax return electronically via the Elster platform by October 31 of this year. 

Since there is no uniform nationwide regulation for the new property tax, it depends on which federal state you live in. There are three different models: the area-based model (in the federal states of Bavaria, Hamburg, Hesse, Lower Saxony, Saarland, and Saxony); the federal model (in Berlin, Brandenburg, Bremen, Mecklenburg-Western Pomerania, North Rhine-Westphalia, Rhineland-Palatinate, Saxony-Anhalt, Schleswig-Holstein, and Thuringia); and the land value tax in Baden-Württemberg.

All models then offer three types of property tax. For property owners, option B is usually the most important.

• Property tax A (agricultural): for agricultural and forestry land
• Property tax B (building): for buildable and developed land as well as for buildings
• Property tax C (undeveloped land): is to be introduced in 2025 so that municipalities can tax undeveloped land at a higher rate. This is intended to prevent speculation and promote housing development.

How is property tax calculated?

The calculation depends on three factors:

• Standard value: After the reform, this is called the property tax value and is calculated differently than the standard value. It can be seen in the standard value assessment notice from the tax office.
• Property tax assessment rate: depends on the type of building. See the Property Tax Act (§§14 and 15 GrStG).
• Tax rate: is set by the responsible municipality; you can also inquire about it there.

The formula for the calculation:

Property tax value (assessed value) x property tax assessment rate x tax rate = annual property tax

What do I need to do now?

The procedure varies depending on the federal state, but you should have received a notification of assessment from the responsible tax office by the end of March 2022, or a public notice requesting you to submit your documents. In federal states where the federal model applies, property owners must have the following information readily available:

• Land area (in the land register extract)
• Standard land value (from independent expert committees)
• Building type (detached house, terraced house, apartment building)
• Living space (in the building plan or in the building file at the building authority)
• Year of construction (also stated in the building plans or building file)

Owners from federal states that have established individual regulations for the calculation must find out what information they need in each case.

Still unsure what factors are important for calculating property tax? Contact us! We'd be happy to advise you.

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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