Chaos surrounding the new property tax: who has to pay more now!

Chaos surrounding the new property tax: who has to pay more now!

The property tax reform in Germany is considered a failure. Today, May 14, 2025, property owners will receive new property tax notices, and a survey by Wiso-steuer shows that two thirds of those affected can expect higher payments. On average, the additional burden for owners is 84.5 percent, although the differences between the federal states are significant: Schleswig-Holstein recorded an increase of 54.7 percent, while Berlin even has to expect an increase of 116.8 percent. This leads to a critical discussion about the reform, which was promised by Finance Minister Olaf Scholz without increasing tax revenue.

The old property tax had become increasingly outdated since the last major determinations of standard values, which were carried out in 1964 for West Germany and 1935 for East Germany. In a ruling on April 10, 2019, the Federal Constitutional Court ruled that the old property tax was unconstitutional. It represented unequal treatment because owners in the old federal states had a different tax basis than in the new ones.

Different models and their effects

The reform stipulates that the calculation of property tax will in future be based on a standard value and tax figure, which vary depending on the region. There are two competing reform models: the cost value model, which is favored by 14 of 16 federal states and is based on actual construction costs, and the land value model, which aims at market prices for land. But critics warn that the cost-value model could significantly increase property taxes, which could also potentially lead to rising rents.

Currently, over seven million owners have already lodged objections to the new notices. In addition, model lawsuits against the state's own taxation procedure are pending. Economist Gerhard Graf even goes so far as to view the reformed property tax as unconstitutional and calls for its abolition.

Financial burdens for owners

The property tax particularly affects the owners of single-family homes and building plots, whereas established residential areas are less affected. In 2023, property tax revenue in Germany was 15.5 billion euros, underlining the importance of this tax in the German financial landscape. The new regulations are therefore not only relevant for property owners, but for almost everyone in Germany, as tenants indirectly bear the costs.

In summary, it can be said that the property tax reform faces significant challenges and criticism of the new regulations continues to grow louder. The uncertainties about the actual financial burdens and the legal compliance of the reform lead to a tense mood among the owners.