Property taxes in Germany: Full guide for Americans

If you're thinking about buying property in Germany or already own a house or an apartment there, it's essential to understand German property taxes. You'll have to pay an annual tax, as well as income taxes, if you decide to rent out your property there.

The system just went through a major overhaul, with brand new rules that started on January 1, 2025.¹ This reform affects every property owner in the country, so here's everything you need to know about how these changes impact you.

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Table of contents
What are property taxes in Germany? What types of property taxes are there in Germany? How are property taxes calculated in Germany? How to pay property taxes in Germany? Are there any property tax exemptions in Germany? Penalties for not complying with property tax rules in Germany Frequently asked questions

What are property taxes in Germany?

Property taxes in Germany are annual fees that all property owners must pay to their local municipality. The money funds essential public services like schools, roads, public transportation, and local infrastructure maintenance.

The German property tax system recently went through a major rebuild. Courts declared the old system unconstitutional because it relied on property values from decades ago, some dating back to 1935 in eastern Germany and 1964 in western regions.¹

These old valuations created big inequalities, with similar properties paying very different tax amounts based on outdated assessments. Starting January 1, 2025, Germany launched a new property tax framework based on current property values.¹

German tax authorities had to collect updated information from property owners since much of the data needed for modern valuations didn't exist in their computer systems.

This huge undertaking required every property owner in Germany to submit detailed information about their real estate property. But now that's done, all annual property taxes are based on this new system.

What types of property taxes are there in Germany?

For ongoing ownership, you'll deal with two main taxes: Grundsteuer (annual property tax) and income tax on rental profits if you rent out your property.

When buying your property, you'll also need to cover some purchase fees. If you sell later, capital gains tax may apply depending on how long you owned the property.

Annual property tax (Grundsteuer)

Every property owner in Germany pays Grundsteuer, which is an annual tax collected by local municipalities. How much you pay heavily depends on where your property is located and what type of property it is.

Under the old system, property taxes were pretty low, typically between 0.26% and 1% of the assessed value.² However, the new system changed the tax calculation, and the tax liability of many properties is now different.

While the government promised the reform would be "revenue neutral" overall, it's possible to see your bill increase or decrease based on how much of your property's value has changed since those decades-old assessments.

Rental income taxes

If you rent out your German property, that income gets taxed like any other earnings.

Germany uses progressive tax rates starting at 14% for lower incomes and climbing to 42% for higher earners, with a top rate of 45% for very high incomes.²

You may also have to pay a 5.5% solidarity surcharge on top of your income tax.²

Here are the tax brackets for 2025:

Income range (EUR)	Tax rate³
Up to 11,604	0%
11,605 to 66,760	14% to 42%
66,761 to 277,825	42%
Over 277,826	45%

If you're an American living outside of Germany, you still owe German taxes on your rental income. However, if 90% of your worldwide income comes from German sources, you may qualify for certain deductions and benefits similar to those of German residents.²

Property transfer tax

When you buy your German property, you'll have to pay a one-time transfer tax called Grunderwerbsteuer. You'll owe this tax if the purchase price exceeds 2,500 EUR, which covers virtually all real estate transactions.⁴

Buyers typically pay this tax, though you can sometimes negotiate with the seller to cover it.

Transfer tax rates depend on the location of your property. Bavaria has the lowest rate at 3.5%, but several other regions charge 6.5%. However, most fall somewhere in between:

Tax rate	Regions⁴
3.5%	Bavaria
5%	Baden-Württemberg, Bremen, Niedersachsen, Rhineland-Palatinate, Saxony-Anhalt, Thuringia
5.5%	Hamburg, Saxony
6%	Berlin, Hessen, Mecklenburg-Vorpommern
6.5%	Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein

This isn't an ongoing real property tax, though. You just pay it once, and that's it.

Capital gains tax

If you want to sell your German property in the future, you may have to pay taxes on your capital gains. However, that's not always the case.

If you sell within 10 years of purchase, profits get taxed at your regular income tax rates.²

However, you can avoid this tax entirely if the property served as your primary residence for at least 2 complete years during your ownership. In this case, single owners can exclude up to 250,000 EUR in gains, and married couples can exclude up to 500,000 EUR.

But keep in mind that this exemption only works if you haven't used it on another property sale recently.

Plus, if you hold the property for more than 10 years, the capital gains tax goes away completely.²

How are property taxes calculated in Germany?

German property tax calculation for the annual tax follows this formula:

Property tax value x Basic federal rate x Assessment rate = Your annual tax⁵

This is the same formula that was used before the reform, but how authorities calculate the property tax value has changed. Under the new system, they consider factors like location, building age, property size, and local land values.

For the basic federal rate, the German government sets these rates by law, and they depend on your property type (ex, a residential property or a commercial one). Your local tax office sets the assessment rate, and it varies across Germany.

How to pay property taxes in Germany?

It depends on your property's location, but your local municipality will likely send you a bill showing the payment schedule and amounts due. They'll also explain how to pay your property fees.

Are there any property tax exemptions in Germany?

No, Germany doesn't have broad property tax exemptions for most property owners. However, if you rent out your property, you can deduct property-related expenses like maintenance, insurance, and mortgage interest.

Penalties for not complying with property tax rules in Germany

Missing property tax deadlines or failing to file required returns can result in financial penalties. Your tax office may charge late fees and interest on unpaid amounts. It's a much better idea to pay your property taxes in Germany on time.

Frequently asked questions

Do you have to pay property tax in Germany as an American?

Yes, if you own property in Germany, property taxes apply to all owners regardless of where you live. If you own German real estate, you owe German property taxes, whether you're American, German, or from anywhere else in the world.

How much is the property tax in Germany?

It depends on your property's location, size, type, and local municipal rates. Under the old system, rates typically ranged from 0.26% to 1% of the assessed value, but your bill can be higher or lower in 2025 and beyond as the new annual tax system rolls out.²

Do I have to pay property taxes in Germany every year?

Yes, German property taxes are annual obligations that continue as long as you own the property. You'll have to pay the Grundsteuer (main property tax) and taxes on your rental income (if you rent out your property) every year.

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Owning property in Germany as an American means you'll have to navigate a few different types of property taxes, including the annual Grundsteuer tax that has changed significantly with the recent reform.

You'll also likely often need to move money between the US and Germany for tax payments, maintenance costs, and other expenses.

Banks usually charge high transfer fees and currency exchange rate markups when you switch from USD to EUR, so international wires can be quite costly.

This is why it’s important to investigate alternatives and see if you can find a better way to move money internationally.

Wise can help you get a better deal on currency conversion. You can convert over 40 currencies at the standard mid-market exchange rate, and we'll show you the fees upfront so you know exactly how much you're paying.

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Sources

1. PWC - Germany
2. Property Tax International - Property Tax in Germany
3. Greenback - US Expat Taxes in Germany
4. Germany Trade and Invest - Taxation of Real Estate
5. Wundertax - Property Tax FAQs

Sources checked 09/19/2025