Property tax reform: New rules affect millions of property owners!

Property tax reform: New rules affect millions of property owners!

Since January 1, 2025, there has been a comprehensive property tax reform in Germany, which will affect land and ultimately also the tenants. This reform is a consequence of a judgment of the Federal Constitutional Court, which requested a fundamental reassessment of property tax on April 10, 2019. The current regulation had been classified as unconstitutional because it was based on outdated unit values ​​from 1964 for West Germany and 1935 for East Germany.

Property tax is important for almost every citizen in Germany. Property owners are obliged to pay them annually, while tenants have to pay them indirectly through increased operating costs. Many people in the Kusel district are therefore faced with uncertain financial burdens. The reform could potentially increase rents, which in particular can put a lot of strain on people with lower incomes.

background of the reform

The new approach to property tax aims to eliminate the unequal treatment of real estate owners. In the judgment of the Federal Constitutional Court, it was criticized that the incorrectly dimensioned tax led to a disadvantage of owners who saw real estate values ​​regularly. Until December 31, 2019, the Bundestag and the Federal Council had time to decide on a new version of property tax in order to meet the requirements of the court. The proposed changes had to be implemented by December 31, 2024 at the latest to meet legal requirements.

The reform affects around 35 million plots of land. The property tax is recalculated as a real tax, which is based on the value of the property. To determine the tax, the unit value and the tax measurement number flow into it, which can vary depending on the region. As a result, the tax rates differ strongly between the municipalities.

Reform models and future effects

In the political discussion, there are currently two models for reforming property tax: the cost value model and the land value model. The cost value model, which is preferred by 14 out of 16 federal states, is based on the actual construction costs. In contrast, the land value model takes into account the market value of the property and is particularly popular with supporters that argue that this model could counteract real estate speculation.

Property tax B, which is collected for structures used for structures, brought around 13.3 billion euros into the coffers in 2016, while property tax A brought in only around 400 million euros for land and forestry. Municipalities are independent in the decision on the amount of the tax rate and can accordingly bring about different financial burdens for citizens.

The results of this reform will have a sustainable effect on local finances and rental prices, which is why both property owners and tenants should follow the developments carefully. The upcoming changes in property tax policy are not only an answer to the constitutional challenges, but also an opportunity for creating more equal framework in the real estate market.