German Capital Gains Tax Calculator 2026

Capital Gains Tax in Germany: The Complete Guide for Expat Investors

If you live and work in Germany as an expat and invest in stocks, ETFs, bonds, or other financial instruments, understanding the German capital gains tax system is essential for optimizing your after-tax returns. Germany uses a flat-rate withholding tax (Abgeltungsteuer) system introduced in 2009, which simplifies the taxation of investment income but also has important nuances that affect international investors.

As a tax resident in Germany, you are subject to unlimited tax liability (unbeschränkte Steuerpflicht), meaning your worldwide investment income, whether from German, European, or international sources, is taxable in Germany. This guide covers everything you need to know about German capital gains tax, from basic rates to fund taxation and cross-border considerations.

The 25% Flat-Rate Tax (Abgeltungsteuer)

Since January 1, 2009, most capital income in Germany has been taxed at a flat rate of 25%, regardless of the taxpayer's personal income tax rate. On top of this, the solidarity surcharge of 5.5% (on the tax amount) and, if applicable, church tax are added:

An important distinction for expats: the solidarity surcharge on capital gains has no exemption threshold. Even if your employment income is below the Soli exemption level, the full 5.5% Soli applies to your investment income.

Günstigerprüfung: Checking for a Lower Rate

If your personal income tax rate is below 25%, you can apply for the Günstigerprüfung (cheaper assessment) in your tax return (§32d para. 6 EStG). The tax office will then calculate whether applying your personal progressive tax rate to your capital income would result in a lower total tax. If so, the lower rate applies. This is relevant for expats with lower overall income, part-time workers, or in years with reduced earnings (e.g., after arrival in Germany with partial-year income).

The Saver's Allowance (Sparerpauschbetrag)

Every tax resident in Germany receives a saver's allowance that exempts a certain amount of investment income from tax:

• €1,000 per person per year
• €2,000 for married couples filing jointly

To utilize this allowance, you must file an exemption order (Freistellungsauftrag) with your bank or broker. If you have accounts at multiple institutions, you can split the allowance across them, but the total must not exceed €1,000 (or €2,000). Without a Freistellungsauftrag, your bank will withhold tax from the first euro of income. You can reclaim the overpaid tax through your annual tax return, but this ties up your money unnecessarily.

What Income Is Taxed?

The flat-rate capital gains tax applies to all forms of investment income under §20 EStG:

• Dividends from stocks (domestic and foreign)
• Interest from bank deposits, bonds, and loan contracts
• Realized capital gains from selling stocks, ETFs, bonds, and other securities
• Gains from derivatives (options, futures, certificates)
• Fund distributions and advance lump sums (Vorabpauschalen)

Capital losses can be offset against capital gains in the same year or carried forward to future years. However, since 2020, stock losses (Aktienveräußerungsverluste) can only be offset against stock gains, not against other capital income like dividends or ETF gains. Additionally, losses from derivatives and worthless securities are limited to an offset of €20,000 per year.

How ETFs and Investment Funds Are Taxed in Germany

The 2018 Investment Tax Reform (Investmentsteuerreformgesetz) fundamentally changed how investment funds are taxed in Germany. For ETF investors (who make up a growing share of the expat investment community) the key mechanisms are:

Partial Exemption (Teilfreistellung)

To compensate for taxes already paid at the fund level, investors receive partial exemptions on all income from qualifying funds:

For example, if you sell an equity ETF with a gain of €10,000, the 30% partial exemption reduces the taxable amount to €7,000. At the standard rate of 26.375%, the tax is approximately €1,846 instead of €2,638, a saving of almost €800.

Advance Lump Sum (Vorabpauschale)

For accumulating funds (thesaurierende Fonds) that do not distribute their income, Germany applies the Vorabpauschale, a minimum annual taxable amount calculated as:

Vorabpauschale = Fund Value (Jan 1) x Basiszins x 0.7 - Distributions

The Basiszins is derived from long-term government bond yields and published annually by the Deutsche Bundesbank. The Vorabpauschale ensures that accumulating funds do not enjoy an unlimited tax deferral advantage over distributing funds. If the fund's actual gain is lower than the calculated Vorabpauschale, the lower amount applies. In years where the Basiszins is zero or negative (as in 2021), no Vorabpauschale is levied.

Cross-Border Investment Taxation for Expats

Expats often hold investment accounts in their home country while building a portfolio in Germany. Here are the key considerations:

Foreign Dividends and Withholding Taxes

Many countries withhold tax on dividends paid to foreign shareholders (e.g., the US withholds 15% under the US-Germany DTA for W-8BEN filers). Germany credits this foreign withholding tax against your German Abgeltungsteuer. Example:

• US dividend received: $1,000
• US withholding tax (15%): $150
• German Abgeltungsteuer (26.375%): $263.75
• Credit for US tax: -$150
• German tax payable: $113.75
• Total tax burden: $263.75 (26.375%)

The credit prevents double taxation but does not reduce the total burden below the German rate. Excess foreign withholding tax (above the treaty rate) must be reclaimed from the foreign country.

Accounts at Foreign Brokers

If you hold investments with a foreign broker (e.g., Interactive Brokers, Charles Schwab, or a broker in your home country), German tax is not automatically withheld. You are responsible for declaring all capital income on your annual German tax return (Anlage KAP). This requires keeping detailed records of all transactions, dividends, and gains/losses throughout the year. Failure to report foreign investment income can result in penalties and back-taxes with interest.

FIFO Rule and Cost Basis Tracking

Germany applies the FIFO method (First In, First Out) when calculating capital gains. If you bought shares of the same security at different prices over time, the shares acquired first are considered sold first. This affects your gain calculation:

• Purchase 1: 100 shares at €50 = €5,000
• Purchase 2: 100 shares at €70 = €7,000
• Sale: 100 shares at €80 = €8,000
• Gain (FIFO): €8,000 - €5,000 = €3,000 (not €1,000 if last-in-first-out were used)

Tax-Loss Harvesting in Germany

You can reduce your tax burden through strategic realization of losses (Verlustverrechnung). Losses offset gains in the same year, reducing taxable income. Unused losses are carried forward indefinitely. Key rules:

• General losses can offset all types of capital income
• Stock losses can only offset stock gains (not ETF gains, dividends, or interest)
• Losses from derivatives and worthless securities are limited to €20,000/year offset
• Loss pots (Verlustverrechnungstöpfe) are tracked automatically by German banks

Practical Tips for Expat Investors in Germany

1. File Freistellungsaufträge immediately: Allocate your €1,000 saver's allowance across your bank and brokerage accounts to avoid unnecessary withholding.
2. Prefer accumulating ETFs: Accumulating funds defer tax until sale (minus Vorabpauschalen). Over long holding periods, this creates a compounding advantage.
3. Choose equity funds over mixed funds: The 30% partial exemption for equity funds significantly reduces the effective tax rate compared to bond or mixed funds.
4. Consolidate accounts: Having fewer accounts simplifies tax reporting and allows better automatic loss offsetting within a single bank.
5. Keep records for foreign accounts: Document all buy/sell transactions, dividends, and withholding taxes if you use foreign brokers. This information is required for your tax return.
6. Consider the Günstigerprüfung: In years with low overall income, applying your personal tax rate may be lower than 25%. Tick the box on Anlage KAP.