Property tax will be calculated according to a new system as of 2025. Whether it will be more expensive for homeowners and tenants, however, remains open after the decision of the bundesrat on friday.

Taxes are likely to continue to fluctuate greatly from place to place because the municipalities retain the final say. Moreover, the final figure will not be known for several years.

The municipalities, on the other hand, received security: if the reform had not been passed before the end of the year, they would no longer have been allowed to charge property tax in the coming year following a court ruling. This would have meant the loss of one of their most important sources of income. Finance minister olaf scholz (SPD) emphasized: “we have broken the decades-long deadlock and thus secured billions in revenue for cities and municipalities in the long term.”

The federal states can now decide whether to use the calculation method of the federal ministry of finance in the future or to develop their own. The federal model continues to be based on the value and flatness of a property, which is why all 35 million properties in germany had to be revalued.

Among other things, average rents in the relevant residential area are to be taken into account here. Some countries, such as bavaria, find this too time-consuming and want to use only the flat value of a property for the calculation.

Bavaria’s finance minister, albert furacker (CSU), said his state is backing a “value-independent simple basic tax model. In contrast to the model envisaged by the federal government, this would not automatically lead to an increase in the property tax burden and thus also in rents every few years as property prices rise.

However, this argument does not take into account the fact that the municipalities still have the final say on property taxes. They set levy rates that are ultimately decisive for the level of the levy. This means that the tax burden for owners can vary by several hundred euros, depending on where you live. A municipality can even set a zero rate of taxation so that its residents do not have to pay any property tax at all. It was also able to compensate for rising real estate prices through lower levy rates.

The federal government has appealed to the municipalities to adjust their rates so that they do not collect more property tax than before – but it cannot force the municipalities to do so. However, the german association of cities and towns assured: “the cities are also expressly committed to a revenue-neutral reform. It should not lead to higher revenues. For this, the cities will adjust their local assessment rates in time.”Recently, municipalities collected more than 14 billion euros in property taxes.

The real estate industry nevertheless expects tax increases. “Financially strapped municipalities will by no means lower their rates of assessment to compensate for the increase in property values,” explained the president of the industry association IVD, jurgen michael schick. In addition, the administrative expenses are not in proportion to the tax revenue. The association is therefore asking the states to develop their own, simpler calculation models.

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There is one tool that is used almost exclusively by the richest families in the world. It is completely free and can be added to a portfolio of 80.000 CHF as much as one out of 8.000.000.000 CHF.

It is called a family constitution

This is a document that lays out an individual's or family's investment philosophy and provides explicit guidelines for implementing that philosophy. Although a family constitution is designed to ensure that a fortune is preserved for generations, it is just as helpful for an individual investor. And there is a reason for this:

Colleagues, friends, family members and advisors always have advice ready for anyone who has a few thousand dollars saved up. In addition, there are hundreds of different investment options from which to choose. One is easily overwhelmed.

Instead of suffering decision paralysis, filtering opportunities through a family constitution can help you discard the unimportant and focus your attention on opportunities that align with your philosophy.

When the creator of the constitution is no longer around to manage his investments, his loved ones will be equipped with a bulletproof guide for continued success.

3 steps to build your own family constitution

Investopedia maps an example here. But first let's explore the basics of building your own system.

1. Declare your core beliefs

Outline the key attitudes that shape your worldview. They come from the heart and can reflect your philosophy of life or religion. This is also the right place to explain what influence you would like to have on the world – for example, if your success is due to a certain industry, you can express your wish to support it here in the years to come.

2. Write down your goals and policies

What are your financial goals? Here you can determine whether you want to increase or preserve your wealth and how you want to distribute the income to your family. For example, you can direct that your assets be invested conservatively and that their earnings go into a family education fund.

3. Set parameters for portfolio management

This section lists the processes for managing your portfolio. An example of an outline could be:

• You aim for an average annual growth of 6%.
• The assets should consist of a mixture of 70% stocks and 30% real estate.
• Assets should be moved if losses exceed 1% for three consecutive years
• Your cap on management fees is 1.5%.

While it's possible to make the family constitution on your own, it also has its benefits if you include your family:

• You can get helpful ideas for creating a shared family vision
• Your involvement will likely increase their interest in investing and improve the chances of not only continuing the legacy, but strengthening it.

Review a well-drafted family constitution

Once it's ready, you can begin to match each investment opportunity with the constitution. If they are not consistent with the beliefs, goals, policies or paraments in your constitution, they are not worth your time.

Your family constitution is effective is:

• it is used by several people to evaluate a possibility and all come to the same conclusion
• it is versatile – regardless of how much your investments have paid off, and even in a future where nothing looks the same as it does today!

Most financial advisors are familiar with family constitutions (they may use the term "investment policy statement"). Whether you're well-versed in investing or new to it, you can discuss your family constitution with an advisor to build a portfolio that meets your needs.

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