Property Tax (Grundsteuer)
Annual tax on property ownership
Property tax (Grundsteuer) is an annual municipal tax on real estate ownership in Germany. It's one of the predictable, tax-deductible expenses for investment properties.
How It's Calculated
Property tax uses a complex formula involving three factors:
- Einheitswert (assessed value): Outdated base value set decades ago
- Grundsteuermesszahl (assessment rate): Federal rate (typically 0.26-0.35%)
- Hebesatz (municipal multiplier): Set by local municipality (200-900%)
Formula: Einheitswert × Grundsteuermesszahl × Hebesatz = Annual Property Tax
Real Example
€450,000 Property in Berlin:
- Einheitswert (assessed):€45,000
- Grundsteuermesszahl:0.35%
- Berlin Hebesatz:810%
- Annual property tax:~€1,275
- Monthly cost:€106
Typical Annual Amounts
- Small cities: €300-600/year
- Mid-sized cities: €600-1,200/year
- Major cities: €1,000-2,500/year
2025 Reform (Grundsteuerreform)
Important: New system starting 2025
Germany is implementing a new property tax calculation system from January 1, 2025. Most property owners will see changes, though municipalities have pledged to keep overall revenue neutral. Expect new assessments based on current land and building values.
Tax Deductibility
Good news: For investment properties, property tax is fully tax-deductible as a business expense (Werbungskosten). At 42% marginal rate, €1,275 annual tax effectively costs you only €740.
Related Terms
Deductible Expenses(Werbungskosten)
Werbungskosten are expenses related to earning rental income that you can deduct from your taxable income. This includes mortgage interest, repairs, property management fees, insurance, and more.
Operating Costs(Bewirtschaftungskosten)
Operating costs (Bewirtschaftungskosten) include property management, maintenance, insurance, property tax, and utilities. Typically 20-30% of rental income.
Property Transfer Tax(Grunderwerbsteuer)
Grunderwerbsteuer is a one-time tax paid when purchasing property in Germany. The rate varies by state (Bundesland) from 3.5% to 6.5% of the purchase price.