Market value assessments and property tax – When is it worth proving a lower value?

A client recently asked whether property tax could be reduced by obtaining a market value valuation – and whether, in such a case, the tax office would even cover the costs of the valuation. There is a recent ruling by the Baden-Württemberg Finance Court (FG) dated 16 October 2025 which addresses precisely this issue of costs.

On 12 November 2025 (including case II R 3/25), the Federal Fiscal Court (BFH) ruled that the federal model for property tax on residential property is constitutional. A key point here is that, under Section 220(2) of the Valuation Act, owners can prove a lower market value if the assessed property tax value is significantly higher than the actual market value. This corrective measure protects against overvaluation and thus contributes to the constitutionality of property tax. However, it applies only in federal model states – not in Bavaria, Hesse, Lower Saxony and Hamburg, which do not permit proof of a lower value.

The key factor is the extent of the discrepancy. Under the federal model, a valuation report is likely to be successful if the market value is at least 40 per cent below the assessed property tax value. For example: the tax office sets the value at €500,000, whilst a valuation report puts it at €350,000. The value determined by the tax office (€500,000) is therefore above the 40 per cent threshold (€350,000 × 140 per cent = €490,000). The lower value (€350,000) can be applied – and the property tax falls significantly.

In the Baden-Württemberg model, which is based exclusively on the land value, the threshold is as low as 30 per cent. An expert valuation is therefore worthwhile there even in cases of minor overvaluation.

Only valuations carried out by the local valuation committee, publicly appointed and sworn experts, or persons certified in accordance with DIN EN ISO/IEC 17024 will be accepted. Valuations by estate agents or architects are not sufficient. Alternatively, an actual purchase price may also be used, provided it was agreed within one year before or after the valuation reference date. As the reference date was 1 January 2022, purchase prices from 1 January 2021 to 1 January 2023 are therefore valid.

If a valuation report establishes a lower value, the question of costs arises. The Baden-Württemberg Fiscal Court (8 K 626/24) recently ruled in favour of a property owner: the tax office was required to reimburse the valuation costs because the significant overvaluation, due to a large, undevelopable green space, would have been apparent even without a valuation report. However, this remains the exception. In principle, the taxpayer bears the costs themselves and must prove the lower value. An expert valuation is therefore particularly worthwhile if there are already concrete indications of a significant overvaluation – for example, due to limited buildability or specific obstacles to use.

It is also important to note that any changes in value occurring after the valuation reference date – such as those resulting from demolition, extension or change of use – must be reported to the tax office by 31 March of the following year (special provisions apply under the federal model for 2025 and 2026). This constitutes a separate tax return. This applies to both decreases and increases in value.

A market valuation report can significantly reduce your council tax if the assessed value is clearly too high. The tax office will only cover the costs of the valuation in exceptional cases. You should therefore carefully consider whether a valuation is financially worthwhile and, where possible, use actual purchase prices as a guide. Also, remember to report any changes in value within the specified timeframe to avoid tax penalties.