Which key do I use to allocate property tax?

Without a different agreement, §556a BGB sets the area key: property tax is distributed by each tenant's share of living area. A different key (e.g. per residential unit) is only valid if agreed in the lease.

Can I pass on property tax for vacant flats?

No. You as the landlord bear the property tax share of vacant units — you may not distribute it to the remaining tenants. But you can claim this part as an income-related expense (Werbungskosten) in Anlage V.

What deadline applies to the utility statement?

You must deliver the statement to the tenant no later than twelve months after the end of the accounting period (§556(3) BGB). If you miss the deadline, you generally can no longer demand a back-payment — but you must still pay out any credit balance to the tenant.

Is property tax deductible for me as a landlord?

To the extent you pass property tax on to tenants, it's tax-neutral for you (income and expense cancel out). The non-allocable part — for vacancy or owner-used space — you deduct as an income-related expense in Anlage V.

Passing Property Tax to Tenants: Landlord Guide 2026

The new property tax notice has arrived, the amount has changed — and now every landlord faces the same question: how much of it may I pass on to tenants, and how do I do it in a legally watertight way? In 2026 this is especially tricky, because the reform has shifted amounts sharply in places. This guide walks you through the allocation key, vacancies, deadlines, and the tax side.

In short: Property tax is chargeable under §2 No. 1 BetrKV. Without a different agreement, the area key applies (§556a BGB). You bear the share for vacancy yourself — and deduct it as an expense. The statement must reach the tenant within twelve months, or your right to a back-payment lapses. Check your own notice first: otherwise an over-valuation is paid, in the end, by you or your tenant.

Step 1: Check your own notice

Before you pass on anything, check the Grundsteuerwertbescheid (value notice). Thanks to the federal model’s flat-rate land reference values, many properties are over-valued. If the assessed value exceeds the market value by more than 40%, a correction is worthwhile under the 2024 Federal Fiscal Court (BFH) rulings. Everything on this is in our guide Property Tax Assessment: Can You Still Appeal?. An inflated property tax burdens either your yield or your tenants — both reasons to look closely.

Step 2: Choose the right allocation key

Property tax is a chargeable operating cost. Condition: the lease provides for passing on operating costs (Betriebskosten). For distribution:

Default: area key — without another agreement you distribute by living area (§556a(1) BGB). A tenant occupying 25% of the total area bears 25% of the property tax.
Different key — only valid if expressly agreed in the lease (e.g. per residential unit or co-ownership share).
Uniform for all — you must apply the same key to every party.

Step 3: Mind vacancy and mixed use

Two situations cause the most errors:

Vacancy. You may not shift the property tax share of vacant flats onto the remaining tenants — you bear that part yourself. It’s not a loss for tax purposes: you claim it as an income-related expense in Anlage V.

Mixed use (residential + commercial). If commercial units cause significantly higher costs, case law requires a prior deduction (Vorwegabzug) before you allocate to residential tenants. Otherwise residential tenants subsidise the commercial part.

Step 4: Keep the accounting deadline

You must deliver the utility statement to the tenant no later than twelve months after the end of the accounting period (§556(3) BGB). The consequences of a late statement are harsh:

Back-payment lost — after the deadline you generally can’t enforce an additional claim.
Credit remains — you must still refund any credit balance to the tenant.

If property tax rose significantly in 2026, you should also adjust the advance payments (Vorauszahlungen) so there’s no large back-payment at year end.

Worked example

Landlord Koch owns a building with three equally sized flats (80 m² each, 240 m² total). Property tax per the notice: €1,800. One flat is vacant for three months.

Share per flat by area: €1,800 / 3 = €600
Vacancy: €600 × 3/12 = €150 borne by Koch
Allocable to the two let flats + the let period of the third: €1,650
Koch deducts the €150 as an income-related expense in Anlage V.

Common mistakes

Passing on vacancy. The most common and costliest accounting error.
Not checking your own notice. An over-valuation runs on year after year.
Missing the twelve-month deadline. You lose the back-payment.
Applying the key inconsistently. Tenants can object to the statement.
Allocating commercial use without a prior deduction. Vulnerable if commercial causes higher costs.

If you want to optimise the running costs of your property for tax, also read Rental income and Anlage V 2026.

How Restio helps

Passing on property tax correctly while capturing the tax side is detailed work with many pitfalls. Restio structures it:

Read your notice — upload your property tax notice. Restio recognises the figures and explains which part is allocable and which is not.
Calculate the allocation — enter living areas and vacancy periods, and Restio shows the correct share per tenant.
Find deductions — Restio flags the non-allocable part that belongs in Anlage V as an income-related expense.
Deadlines in view — the Financial Guardian reminds you of the twelve-month accounting deadline.

For watertight lease drafting and complex prior deductions, consult a tax advisor (Steuerberater) or a specialist lawyer for tenancy law — Restio prepares the figures so the appointment is short.

The reform turns every utility statement in 2026 into a checking exercise. Landlords who verify their own notice, keep vacancy cleanly out, and meet the deadline avoid disputes with tenants and give away no deductible expense. The legal basis for the pass-through is in the Operating Costs Ordinance.