Property taxes in Germany: is it expensive to buy property?

Between one-off purchase taxes and recurring annual fees, expats should budget for an additional 10% to 15% of the purchase price to cover closing costs.

While the base property tax rates are relatively low, a massive national reform effective from January 1, 2025, has modernized how German authorities value homes.

This guide breaks down what you need to pay, who is responsible, and how to stay compliant with the German tax office (Finanzamt).

What are the main property taxes in Germany?
Taxes on buyers
Taxes on sellers
Taxes on homeowners: recurring payments
Is rental income taxed?
First vs second home: tax implications
How to save money on your property purchase
Wealth taxes in Germany
How to pay your taxes
When to speak to a tax professional
Useful resources

Use Wise to save money on your property purchase

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What are the main property taxes in Germany?

There are three primary categories of tax related to real estate in Germany:

Property Transfer Tax (Grunderwerbsteuer): A one-time fee paid during the purchase process.
Real Property Tax (Grundsteuer): A recurring annual tax paid to the local municipality.
Income Tax on Rental Profits: Applicable if you rent out your property.

Sellers may also face Capital Gains Tax (Spekulationssteuer) if they sell an investment property within a specific timeframe.

Who is subject to these taxes?

German property taxes apply to all owners regardless of their residency status or nationality.

Residents: Pay taxes on German property as part of their standard tax obligations.
Non-residents: Are subject to “limited tax liability,” meaning they only owe tax on income generated within Germany (like rental profits).
Corporations: Businesses owning real estate may face additional trade taxes (Gewerbesteuer).

Taxes on buyers

When purchasing a home, you must pay the Property Transfer Tax (Grunderwerbsteuer). This tax is usually a prerequisite for being entered into the land registry (Grundbuch) as the official owner. Rates vary significantly by federal state, typically ranging from 3.5% to 6.5%.

Value-Added Tax (VAT)

VAT (Umsatzsteuer) is generally not applicable to residential property purchases in Germany. However, it may apply to commercial properties or if a buyer voluntarily opts into VAT liability to claim credits on renovation or construction costs.

Notary and Land Registration Fees

While technically fees rather than taxes, these are mandatory legal costs. Buyers should budget approximately 1.5% to 2% of the purchase price for the notary to certify the contract and for the land registry entry.

Exemptions:

Transfers between direct relatives (e.g., parents to children).
Transfers between spouses or registered partners.
Properties with a purchase price below €2,500.

Housing

Buying a house in Germany

Taxes on sellers

Sellers in Germany primarily deal with Capital Gains Tax (Spekulationssteuer). This is not a separate tax but is treated as part of your personal income tax, calculated at your progressive rate (14%–45%).

Exemptions:

The 10-year rule: No tax is due if you have owned the investment property for more than 10 years.
Primary residence: No tax is due if you lived in the property yourself for the year of the sale and the two preceding years.

Taxes on homeowners: recurring payments

The Real Property Tax (Grundsteuer) is an annual levy collected by local municipalities. As of 2025, a new valuation system is in place to ensure taxes are based on modern property values rather than assessments from the mid-20th century.

The tax is calculated using three factors:

Property value: Determined by the Finanzamt based on location, age, and size.
Basic federal rate: Set by law based on property type.
Municipal multiplier (Hebesatz): Set by your local city, often ranging from 300% to 700%.

Exemptions:

Properties owned by public authorities or charitable organizations.
Buildings used for religious purposes.

Taxes

The tax system in Germany

Is rental income taxed?

Yes, if you rent out a property in Germany, the net profit is subject to Income Tax. Non-residents are taxed at the same progressive rates as residents (14%–45%), plus a 5.5% solidarity surcharge.

Landlords can lower their tax bill by deducting “income-related expenses” (Werbungskosten), including:

Mortgage interest.
Maintenance and repair costs.
Property management fees.
Depreciation (AfA): Typically 2% to 3% per year depending on the building’s age.

Exemptions:

Income below the tax-free basic allowance (only for residents or those with unlimited tax liability).
Additional income under €410 per year may be tax-exempt for certain residents.

First vs second home: tax implications

Germany does not generally offer a national “first-time buyer” tax credit, but some regions have introduced subsidies to help families.

Secondary Home Tax (Zweitwohnungsteuer): Many major cities (like Berlin or Munich) charge an extra municipal tax if you keep a second residence.
Investment property: Unlike a primary home, an investment property does not qualify for the 2-year capital gains exemption.

How to save money on your property purchase

When buying a home in Germany from abroad, currency exchange fees can quietly add thousands to your costs. Using a specialist service like Wise can help you save money by avoiding high bank markups.

You can use Wise to:

Pay the seller directly: Transfer large sums at the mid-market exchange rate with transparent fees.
Fund your German account: Move money between your home bank and your German bank account quickly to cover notary and tax bills.

Fill out Wise’s online form today to find out how they can assist you.

International money transfers

Wise review in Germany

Wealth taxes in Germany

There is currently no net wealth tax in Germany. While the tax remains in the legal code, it has not been levied since 1997 following a court ruling. Real estate is instead taxed through the annual Grundsteuer and inheritance or gift taxes.

How to pay your taxes

Property taxes are managed by the local tax office (Finanzamt).

Transfer tax: You will receive a bill after the notary certification. Payment is required to finalize the deed.
Annual tax (Grundsteuer): This is typically paid in four quarterly installments on February 15, May 15, August 15, and November 15.
Rental income: Reported via an annual tax return, due by July 31 of the following year.

When to speak to a tax professional

German tax laws are complex, particularly regarding the 2025 Grundsteuer reform and cross-border rental income. It is usually a good idea to speak to a certified tax advisor (Steuerberater) when buying or selling property to ensure you are utilizing all available deductions and avoiding penalties.