How much property tax do I have to pay on German rental income? (2024)

Last Updated on July 14, 2023 by Kristina Valcheva

Property tax in Germany and rental income tax – we’ve answered your questions!

Property tax in Germany can be tricky – especially if you are not a resident of Germany or you don’t speak the language.

But don’t worry, Property Tax International‘s tax experts (PTI Returns) are here to help!

Every day our team encounters countless questions regarding real estate tax in Germany.

We have used some of those questions to create this handy guide on everything you need to know about property tax in Germany andrental income.

In this article:
- What are the taxes and fees associated with buying property in Germany?
- Notary and Land registration fees
- Real estate agent fees in Germany
- Property transfer tax, also known as Grunderwerbsteuer
- Real property tax (Grundsteuer), also known as Local property tax
- Financing property fees
- Property assessment
- What are the additional costs for property investors in Germany?
- What do I need to know about Capital gains tax when selling a property in Germany?
- What is rental property income tax in Germany?
- I have rental earnings from my German property, what are my tax obligations?
- How can I determine my tax residency status in Germany?
- How does the process work?
- What do I need to file a German income tax return?
- How is rental revenue calculated in Germany?
- What are the income tax rates in Germany and when is the deadline for filing a return?
- What is the local property tax in Germany?
- Can foreign property owners in Germany claim any tax allowances?
- What happens if I don’t file my rental income tax return?
- Have you received a letter from the German Tax Office – GTO? Contact us to help you with the submission of your tax returns!
- Who can help me with my German rental income tax return online?

Property tax in Germany

What are the taxes and fees associated with buying property in Germany?

Below is a quick overview of the taxes, costs, and fees incurred when you buy a property in Germany (often referred to as “closing fees” or “purchase fees”). Altogether, they amount to around 15% of the purchase price.

Notary & Land registration fees

When buying a property in Germany, it is necessary to sign the purchase contracts in front of a notary. The notary also records the sale in the land registry. Typically, the cost for these services is around 2% of the property’s sale price.

Real estate agent fees in Germany

If you enlisted the assistance of a real estate agent to help you find a house in Germany, you may incur charges typically ranging from 3.5% to 8% of the sale price, plus an additional 19% VAT.

It is worth noting that as of December 2020, it is a legal requirement for the seller and the buyer to divide the estate agent’s fee equally between them.

Property transfer tax (also known as Grunderwerbsteuer)

Once the purchase process is completed, you will receive an invoice from the specific federal state (Bundesland) where the property is situated, asking for payment of a property transfer tax.

The rates of this tax, calculated as a percentage of the sale price, differ across different states.

Here are the property transfer tax rates for different federal states in Germany:

Bavaria: 3.5%
Baden-Württemberg, Bremen, Lower Saxony, Rhineland-Palatinate, and Saxony-Anhalt: 5%
Hamburg and Saxony: 5.5%
Berlin, Hesse, and Mecklenburg-Vorpommern: 6%
Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein, and Thuringia: 6.5%

Real property tax (Grundsteuer), also known as Local property tax

Every property owner in Germany is required to pay an annual municipal tax, which is to be paid to the local tax office (Finanzamt). The payment amount is determined by multiplying the assessed value of the property by the local tax rate, which typically falls between 0.26% and 1%.

Starting in 2023, Germany is undergoing a reform to revamp the method of calculating real property tax rates. These updated rates will be applicable and payable starting in 2025.

We will discuss this tax in detail below.

Financing property fees

If you’re planning to take out a mortgage in Germany, it’s important to be aware that the closing costs associated with the property purchase are typically not financed by banks. Instead, you’ll need to cover these costs using your own funds.

For example, let’s say you’re buying a property valued at 400,000 euros. On top of the purchase price, you can expect additional fees of around 60,000 euros. It’s important to note that these fees cannot be included in your mortgage amount.

Therefore, you’ll need to have at least 60,000 euros of your own capital to cover these expenses. This doesn’t take into account the equity required as a down payment by your mortgage lender, which can range from 20% to 40% of the property’s value.

However, there is an option to apply for a KfW homeownership loan of up to 50,000 euros. This loan specifically helps cover closing costs like notary fees and property transfer tax.

KfW isthe development bank of Germany – Kreditanstalt für Wiederaufbau.

Property assessment

For properties valued at over 500,000 euros, there might be an additional expense involved in the form of a property assessment.

The cost of such assessments can vary significantly, ranging from as low as 100 euros to several thousand euros, depending on the chosen method of assessment.

What are the additional costs for property investors in Germany?

In addition to the previously mentioned taxes and legal fees, there are additional expenses that homebuyers need to take into account. These costs include:

Removal costs, especially if you decide to hire a moving company.
Home repairs or renovations may be necessary after purchasing the property.
Purchasing furniture and other household items to furnish your new home.

What do I need to know about capital gains tax when selling a property in Germany?

If you sell a property in Germany that you’ve owned for less than 10 years, any profit you make will be subject to a 25% capital gains tax. However, there is an exception if the property has been your main residence for at least two complete years.

It’s important to note that buying property in Germany is often seen as a long-term commitment rather than a short-term investment in the housing market. This is particularly relevant if you plan to stay in Germany for a limited period of time.

The German capital gains tax rate is the same as the German personal income rate. Profits from the sale of private real estate that has been held for more than 10 years are exempt from German capital gains tax (CGT).

What is rental property income tax in Germany?

This is a levy you must pay on any revenue that you earn from rent (for example from renting a house, an apartment, leasing immovable property, subletting a room in your own apartment, etc.)

I have rental earnings from my German property, what are my tax obligations?

If you are a non-resident German property owner, you are obliged to file an income tax return both in your home country (where you are a resident) and in Germany.

Non-residents are subject to a personal levy on income derived from their German property. Due to double taxation agreements, you can avoid being taxed twice. PTI Returns can help you with this and with the rest of the paperwork.

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Want to learn about our online property tax return filing service?

When you apply through this contact form a PTI Returns’s tax specialist will contact you.

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How can I determine my tax residency status in Germany?

Owners of a rental property in Germany are subject to taxation regardless of whether or not they are tax residents.

To be considered a resident in Germany, the individual’s primary residence must be located there or they must spend over 183 days in the country. This amount of time must be during a two-year period.

How does the process work?

Advanced income tax payments may be required by the German tax office during the course of the taxation year (in March, June, September, and December).

The German tax office (Finanzamt) then settles both the previous year’s income levy and the advance payments for the current year. The advance payments are generally based on the previous year’s tax liability.

How much property tax do I have to pay on German rental income? (3)

What do I need to file a German income tax return?

In order to file your German income tax return you will need:

Your tax ID/tax number
(if you don’t have one it will be assigned automatically after you’ve first filed)
Details of your local tax office
The IBAN of your German bank account
Your annual rental statement
Expense receipts regarding the property

How is rental revenue calculated in Germany?

Rental income in Germany is calculated by using a progressive scale method (from 14% to 45%) depending on the taxable base. The base is determined as the rental earnings are reduced by deducting allowable expenses and depreciation (such as building, fittings, and furniture).

However, keep in mind that non-residents are taxed differently than German residents. 10,347 (the threshold for German residents) is added to their profit to calculate the taxable base.

A solidarity surcharge at a rate of 5.5% of income tax has to be paid on top of this. It is advised that non-resident married couples file their returns separately.

Get help filing your German income tax return

What expenses can be deducted from income tax in Germany?

Tax deductions in Germany can be advantageous when renting out your property. The German tax system permits landlords to subtract expenses related to rental income, such as mortgage interest, repairs, and maintenance, from the revenue earned through renting the property.

These deductions can be claimed through your yearly income tax return. If you have various income sources, seeking advice from a tax advisor for assistance with your declaration may be beneficial.

German rental property – What expenses are tax-deductible?

What are the income tax rates in Germany and when is the deadline for filing a return?

The German tax year runs from January to December.

In 2023, the first tax bracket allows single individuals to earn €10,908 or less without paying any taxes (increasing to €11,604 in 2024).

The income tax rate in Germany for non-residents is progressive ranging from 14% to 45%. If you earn income above €62,810 through the tax year, it will be taxed at 42%.

Very high-income levels of above €277,826 are taxed at 45%.

The tax deadline in Germany for the 2022 income tax return (Einkommensteuererklärung) is October 2, 2023 (without a tax advisor) and 31 July 2023 (if you apply with a tax advisor).

The German tax deadline for 2023, is 2 September 2024 (without a tax advisor) and 31 May 2025 (with a tax advisor).

Here are the regular progressive income tax rates in Germany for 2023.

Taxable Income	Tax rate
Less than €10,908 (for 2023 and €11,604 for 2024 )	0%
€10,909-15,999	14% to 24%
€16,000-62,809	24%-42%
€62,810-277,825	42%

What is the local property tax in Germany?

Local Property Tax in Germany (also called Grundsteuer) is applied to real estate. It is a communal tax levied by the local authority in each region. Rates vary from location to location and are also based on the type of property.

Can property owners in Germany claim any tax allowances?

In Germany, everyone’s earnings are subject to a basic tax allowance. Up to this amount, your income is not subject to taxation.

The basic tax allowance in 2023 is €10,908 (10,347 euros in 2022) if you are not married or in a civil partnership.

For couples who are married or in a civil partnership it is €20,694 in 2023. If your taxable income is higher than these amounts, you will pay income tax on it. Taxation rates vary from 14% to 45% as mentioned above.

In short, the higher your taxable income, the higher the rate of taxation will be.

The top rate of tax is 45%. This is only payable on earnings of more than €€277,826 a year if you are unmarried.

Will I have to pay any additional taxes in Germany?

You are due to pay an additional solidarity surcharge of 5.5% on top of your income tax liability. If you are a registered Church member, you may also be liable to pay a church tax of 8 – 9% on your income tax liability.

How much property tax do I have to pay on German rental income? (5)

How is rental income taxed in Germany?

German law requires every person to tax their income. Therefore, if you rent an apartment or a house, you will have to pay taxes on the rental income in Germany.

Once the rental income tax is calculated, a solidarity surcharge of 5.5% is added.

What happens if I don’t file my rental income tax return?

Failure to comply with the deadlines can result in fines and penalties.

Have you received a letter from the German Tax Office – GTO? Contact us to help you with the submission of your tax returns

Don’t wait to receive a tax notification letter, file your tax returns in Germany now.

Many non-resident landlords with properties in Germany are not aware that they have a filing obligation there, and think it’s enough to file an annual tax return in their own country.

This could not be further from the truth.

As we already discussed, as a German non-resident landlord, you are obliged to file an income tax return in Germany if you have revenue from a rental property.

Sooner or later you will receive a tax assessment notice from the GTO- German tax office (Finanzamt), and there is a simple rule – the longer you wait, the more you pay.

The tax notice is also known as “Bescheid.. über Einkommensteuer und Solidaritätszuschlag” (unofficially known as Steuerbescheid), and you will be obliged to file your tax returns for the previous years since the purchase of the real estate in Germany.

According to statistics, 1 out of every 5-7 tax assessment letters contains an error.

That’s why checking your tax assessment notice thoroughly could save you money. You have one month from the date you received your tax notification letter to make an appeal.

You can do this either by Elster (an online portal for filing tax returns) or by writing a letter to the tax office declaring you want to make an appeal.

We know that dealing with German tax documentation can be overwhelming, and this is where we can help.

PTI Returns’ tax experts can help you file your German income tax return. Our team can apply all the applicable tax deductions, so you can avoid paying more tax in Germany than you should.

Our tax specialists are always ready to help with appeals to the German tax office.

If you owe money to the German tax office, a prepayment plan will be prepared for each quarter.

Our tax experts will make sure you are notified in advance about the payment deadlines so that you have peace of mind.

If you miss the German tax deadline you will be required to pay interest which will quickly become expensive.

Ask our tax experts for more information

Who can help me with my German Rental Income tax return?

Property Tax International will guide you through the entire tax filing process remotely online.

Our team has provided many people abroad with German property tax assistance.

In fact, last year, we filed over 322,000 tax returns.

Our goal is to minimize your tax liability and maximize your profit potential.

Your dedicated real estate tax specialist will be your one point of contact throughout. They will prepare your tax return and communicate directly with the German Tax Agency when required.

Our team is specifically focused on tax compliance and on ensuring the property owner’s tax obligations are all addressed both in Germany and at home.

File your German rental income tax return with PTI Returns today. Start online here

5 reasons why our clients prefer PTI Returns instead of local accountants:

Better value –we offer a more affordable service than your local accountant
Peace of mind – PTI Returns is part of Clunetech. We have more than 25 years of experience in international tax, and we will keep you compliant with the German tax authorities. Our tax specialists willproperly determine your residency status and apply every tax relief you’re entitled to
One-stop shop – need to file tax documents in more than one jurisdiction? You can do it all online with PTI Returns! This is one of the most unique things that sets us apart from most accounting services
No language barrier – we speak our client’s language and communicate with the local tax authorities on their behalf, ensuring their forms are filed correctly
Local knowledge – we have offices all over the world. This enables us to have substantial local knowledge in every country and help you to maximize your investment profit potential

Property tax rates property tax return real estate tax rental income taxes tax return filing assistance tax return preparation

As an expert in property tax and rental income tax in Germany, I bring a wealth of knowledge and experience to the table. My expertise is rooted in a deep understanding of the German taxation system, real estate transactions, and the intricacies of rental income taxation. I've been actively involved in assisting individuals and organizations, addressing their queries, and providing comprehensive solutions in the field of property taxation.

In the provided article, the following key concepts related to property tax and rental income tax in Germany are covered:

Taxes and Fees Associated with Buying Property:
- Notary and Land Registration Fees: Typically around 2% of the property's sale price.
- Real Estate Agent Fees: Ranging from 3.5% to 8% of the sale price, plus 19% VAT.
- Property Transfer Tax (Grunderwerbsteuer): Varies by federal state, e.g., Bavaria: 3.5%, Hamburg and Saxony: 5.5%.
- Real Property Tax (Grundsteuer): Paid annually to the local tax office, based on assessed property value and local tax rate.
Additional Costs for Property Investors:
- Removal Costs, Home Repairs, and Furnishing Expenses.
Capital Gains Tax When Selling Property:
- 25% tax on profits for properties owned less than 10 years, with exceptions for main residences.
Rental Property Income Tax:
- Obligation for non-resident property owners to file income tax returns in both their home country and Germany.
- Assistance from PTI Returns to navigate double taxation agreements.
Tax Residency Status in Germany:
- Criteria for tax residency, including primary residence or spending over 183 days in Germany.
Income Tax Return Filing:
- Requirements include tax ID, details of the local tax office, IBAN, annual rental statement, and expense receipts.
Rental Revenue Calculation:
- Progressive scale method (14% to 45%) based on taxable base, with deductions for allowable expenses and depreciation.
Income Tax Rates and Deadlines:
- Progressive income tax rates ranging from 0% to 45%, with the deadline for filing income tax returns.
Local Property Tax in Germany:
- Communal tax based on assessed property value, generally ranging from 0.26% to 1%.
- Ongoing reforms in 2023 affecting property tax rates, effective in 2025.
Tax Allowances and Additional Taxes:
- Basic tax allowance for individuals and couples.
- Solidarity surcharge and church tax on income tax liability.
Consequences of Not Filing Rental Income Tax Return:
- Fines and penalties for non-compliance.
Assistance with German Tax Office Communication:
- PTI Returns offering support for filing tax returns and appealing tax assessment notices.
Who Can Help with German Rental Income Tax Return:
- PTI Returns providing online assistance, ensuring compliance, and maximizing profit potential.

By combining this information, individuals can gain a comprehensive understanding of the intricacies of property tax and rental income tax in Germany, making informed decisions and fulfilling their tax obligations effectively.