Bad news for property owners: Property taxes were higher than before in many municipalities in 2022. The property tax reform will apply from 2025 – then it could get even more expensive.
In the past year, many German municipalities have increased the property tax. In every eighth municipality in Germany, the property tax rose in 2022 – this is the result of a study published by the consulting firm Ernst & Young (EY). The increase last year is thus the strongest since 2016. On the other hand, there were only reductions in a very small proportion of the municipalities.
Responsible for the increased taxes was the increase in the assessment rates, a factor in determining the tax amount. Compared to 2021, the multiplier rates in the non-city states increased most significantly in North Rhine-Westphalia, followed by Saarland and Rhineland-Palatinate. The smallest increase was in Thuringia and Saxony. On average nationwide, the property tax rate was 391 percent last year, five percentage points higher than in 2021.
Property tax as an important source of income for municipalities
According to EY industry expert Heinrich Fleischer, the reason for the upward trend lies in the empty coffers of the municipalities: “The poor financial situation of many municipalities often requires an increase in the assessment rates, which leads to an additional burden on the citizens.” Like the citizens, the municipalities also have to contend with cost increases and pass them on.
The five-year comparison shows the development of the property tax increase: nationwide, the assessment rate has risen in 38 percent of the municipalities within five years and has fallen in only two percent. “We see a nationwide trend towards higher and higher property tax rates,” says Fleischer. However, location competition among the municipalities is not to be observed – unlike with the trade tax, which is also calculated with a multiplier as a factor.
property tax reform from 2025
The real estate tax is calculated from three factors: the assessed value, the tax index and the assessment rate. Cities and municipalities determine the assessment rate independently and thus determine the amount of the tax. Owners of developed and undeveloped land must pay the so-called property tax B. There is also property tax A for agricultural and forestry properties.
From January 2025, at the instigation of the Federal Constitutional Court, a new calculation for property tax is to take effect. The court had previously criticized the calculation of the property value by the tax office as outdated. Millions of plots of land and real estate in Germany were revalued for the property tax reform. According to the EY report, in the course of the revaluation, property owners are also threatened with higher costs if the assessment rates do not fall.