Property tax: It is not only the building loan that counts when it comes to owning a home

As soon as it comes to home ownership, every household has to deal with certain hurdles and challenges. A first obstacle is the building loan. Its planning and preparation determine how satisfied you are with the decision over the years.

On the other hand, builders and property buyers are always faced with costs that cannot be avoided when buying property. We are talking about:

  • Notary fees
  • the land register entry
  • and property tax.

How much is property tax? Why are taxes different between municipalities?

Property tax – the calculation of the tax

Property tax - the calculation of the tax

In principle, property tax is levied in Germany for the ownership of real estate and land.

Partial ownership and leasehold rights are also recorded.

The following variables form the basis of the calculation:

  • the unit value (determined by the tax office)
  • the property tax metric
  • the lifting rate (by municipality).

These three basic factors result in the tax liability applicable to the respective property.

Example: The unit value of a single-family home is set at 100,000 USD. The measure used here (old federal states) is a rate of 3.5 per mille or 0.0035 percent. The municipality estimates a rate of 375 percent. For the example, the property tax amount is USD 350 and the annual tax is USD 1,225.

  • Different types of tax are differentiated from each other in property tax law. Property tax A is levied on agricultural land. Property tax B (for built-up property) is intended for residential property.

Take property tax into account when buying property

Take property tax into account when buying property

Families today often only see the advantages of buying land. Ultimately, the low building rates ensure that you quickly decide on the building loan and home. Especially the incidental purchase costs mentioned at the beginning and the fact that the purchaser has to finance the property tax are often forgotten here.

The example calculation already shows the effects and financial scope of the tax. Anyone who decides to buy a property as a household – whether as a family or single – must be aware of the consequences of their decision.

And should also inform yourself in advance about the lifting rates. While some municipalities work with a factor of less than four, in individual cases a lifting rate of more than 800 percent can be found.

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