Income Tax Return for Capital Gains: The Complete Guide for Private Investors
This article was created with the help of artificial intelligence.
Key Takeaways
- Capital gains are taxed at 25 percent withholding tax plus 5.5 percent solidarity surcharge and, if applicable, church tax, resulting in an effective rate of approximately 26.375 percent.
- The saver's allowance has been 1,000 euros per person and 2,000 euros for married couples since 2023 and can be used directly at the bank via an exemption order.
- An income tax return using Form KAP is mandatory for foreign securities accounts, tax refund interest from the tax office, private loans and hidden profit distributions.
- Losses from share sales can only be offset against gains from other share sales, not against interest or dividends.
- For accumulating funds, an advance lump sum is levied based on the base interest rate, which was 2.29 percent in 2024 and 2.53 percent in 2025.
- The 2024 Annual Tax Act removed the previous limit of 20,000 euros per year for offsetting total losses from capital investments and futures transactions.
Income Tax Return for Capital Gains: The Complete Guide for Private Investors
Capital gains such as interest, dividends and realized gains are subject to a 25 percent withholding tax in Germany plus solidarity surcharge and, if applicable, church tax. Domestic banks automatically remit this tax. An income tax return for capital gains using Form KAP becomes necessary when no tax has been withheld, such as with foreign securities accounts, or when money can be recovered.
What counts as capital gains?
The legislator summarizes income from capital assets in Section 20 of the Income Tax Act. This includes all income generated from invested money. Those who invest privately encounter these returns constantly.
The three most important types of returns
- Interest from savings accounts, fixed-term deposits and bonds
- Dividends as profit distributions from corporations
- Realized capital gains from the sale of securities
Why the distinction matters
Each type of return is treated equally, but the offsetting follows its own rules. Losses from share transactions can only be offset against share gains, not against interest or dividends. This separation affects what ultimately remains in the account.
How high is the capital gains tax?
Since January 1, 2009, a flat rate has applied. The bank calculates it before the money reaches the investor.
The composition in detail
- 25 percent capital gains tax on the return
- 5.5 percent solidarity surcharge on the tax
- Possibly 8 or 9 percent church tax depending on the state
Without church tax, this results in an effective rate of approximately 26.375 percent. With church tax, the burden increases depending on the state to approximately 27.82 to 27.99 percent. Capital gains tax is therefore also called withholding tax: once it is withheld, the tax liability is basically settled.
What the term withholding means
With purely domestic securities accounts, the financial institution handles everything. In this case, the investor does not need to do anything else. The withholding effect only applies if there are no special cases.
The saver's allowance and the exemption order for 2024
Every saver is allowed to receive part of their returns tax-free. This amount has been 1,000 euros per person and 2,000 euros for married couples since 2023. Until 2022, it was 801 euros or 1,602 euros respectively, approximately one-fifth less.
How the exemption order works
With an exemption order, the investor informs their bank up to what amount it should not withhold any tax. A correctly established exemption order for 2024 ensures that the saver's allowance takes effect immediately without the tax office being involved.
Distribution across multiple banks
Those who maintain accounts at various institutions should distribute the exemption order for 2024 strategically. It makes sense to allocate the largest portion to where the highest returns occur. An incorrectly distributed exemption order for 2024 results in tax being paid at one location while the allowance remains unused elsewhere.
When a correction is worthwhile
If returns change, the exemption order for 2024 should be adjusted. If it is not fully utilized, overpaid capital gains tax can be recovered through the income tax return. An annual review takes little time and avoids unnecessary deductions.
Form KAP as the central form for the income tax return for capital gains
Form KAP is used to declare income from capital assets. Since 2011, the form can be submitted completely digitally via ELSTER. Since 2018, there have also been two special forms.
The three form variants
- Form KAP: for nearly all capital gains
- Form KAP-INV: mandatory for investment shares held with a foreign bank or fund company
- Form KAP-BET: for returns from participation in a partnership, a rather rare case
Separate form for each spouse
A common misconception concerns married couples. Each partner needs their own Form KAP, even with joint filing. Returns are recorded on a personal basis and only then consolidated.
When is the income tax return for capital gains mandatory?
In certain cases, there is no way around filing. Whenever no capital gains tax is withheld, the investor must take action themselves.
The classic mandatory cases
- Returns from foreign banks or securities accounts without automatic tax withholding
- Refund interest from the tax office
- Interest from private loans with arm's length transaction procedures
- Hidden profit distributions
Keep an eye on foreign securities accounts
Returns from foreign institutions are not automatically reported to the German tax office. These amounts must definitely be included in the income tax return for capital gains, fund-specific in Form KAP-INV. Anyone who forgets them risks a subsequent assessment.
When voluntary filing is worthwhile
Even without an obligation, an income tax return for capital gains can pay off. In several situations, investors recover overpaid tax.
Unused allowance
If no exemption order was issued, the bank withholds tax from the first euro. If returns are below 1,000 euros, the withheld capital gains tax can be fully recovered.
Request favorable assessment
In line 4 of Form KAP, you can request a favorable assessment. The tax office then compares your personal income tax rate with the 25 percent. If your personal rate is lower, the lower rate applies. This mainly affects students, retirees with small pensions and part-time employees.
Offsetting losses
Gains and losses from various securities accounts can be combined through the income tax return. To use this, you must request a loss certificate from the respective bank by December 15 of the current year.
Taxation of shares: What investors need to know
Those who want to handle share taxation should know the special features of realized gains. A taxable gain only arises upon sale, not from mere price increases in the securities account.
The loss pool for shares
When taxing shares, there is a separate offset circle. Losses from share sales only reduce gains from other share sales. This strict separation distinguishes shares from other securities.
Don't forget worthless shares
For shares that have become worthless, the bank does not perform automatic loss offsetting. These losses must be manually entered into the income tax return. Anyone who neglects this forfeits a recognized loss when handling share taxation.
Record dividends correctly
Dividends flow into the general offset pool. When taxing shares, they therefore count differently than pure capital gains. The bank's annual tax certificate lists both items separately.
ETF Income Tax Return: Special considerations for funds
Those who invest in funds encounter their own rules when filing an ETF income tax return. Since the 2018 investment tax reform, partial exemptions and advance lump sums apply.
Understanding the advance lump sum
For accumulating funds, the tax authorities levy an advance lump sum based on the base interest rate. This was 2.29 percent in 2024 and 2.53 percent in 2025. The advance lump sum is a key point in any ETF income tax return because it can create a tax burden even without a sale.
Domestic and foreign securities accounts
If a fund is held in a domestic securities account, the bank handles the calculation. With foreign custody, the ETF income tax return belongs in Form KAP-INV, each tranche in its own column. This obligation is easily overlooked.
Utilize partial exemption
Stock ETFs are partially exempt from tax. For stock funds, 30 percent of returns remain tax-free, while for mixed funds at least 15 percent. This partial exemption is automatically considered for domestic securities accounts. In the ETF income tax return, it should be recorded correctly so that excessive tax does not accrue.
2024 Annual Tax Act: Loss offsetting without limits
An important change concerns total losses. The previous limit on loss offsetting of 20,000 euros per year for capital investments and futures transactions has been eliminated.
What the elimination means
With the removal of Section 20, paragraphs 6, sentences 5 and 6 of the Income Tax Act, total losses can be retroactively and indefinitely offset against gains from capital assets for all open cases. Those who had high losses in the past benefit noticeably.
The non-assessment certificate as an alternative
If total taxable income is below the basic tax-free allowance of 12,348 euros in 2026, a non-assessment certificate can be requested. Then the bank does not withhold any capital gains tax at all.
Who benefits from the non-assessment certificate
Particularly retirees with small pensions and students benefit. The certificate is valid for up to three years and saves the detour through an income tax return.
Common mistakes in the income tax return for capital gains
Many investors pay more than necessary. Most errors arise from missing documents or overlooked special cases.
The typical pitfalls
- Annual tax certificates not retained or submitted
- Exemption order is missing or unfavorably distributed
- Losses from worthless shares not reported
- Foreign returns forgotten
- Favorable assessment not requested
- Loss certificate requested after December 15
Review tax certificates
Banks make errors in tax withholding. Comparing the annual tax certificate with your own records uncovers incorrect amounts and protects against excessive capital gains tax.
Practical tips for filing
With a clear routine, the income tax return for capital gains becomes manageable. Those who gather documents early save time searching near the deadline.
Compile documents in time
- Annual tax certificates from all banks and securities accounts
- Documentation of foreign returns
- Loss certificates, if requested
- Evidence of private loans
Software makes completion easier
Programs like WISO Steuer or the ELSTER platform guide you step by step through Form KAP. They point out missing information and check plausibility.
Keep church tax in mind
Those who are subject to church tax should verify whether the bank correctly performs automatic withholding via the church tax registration procedure. If you object to automatic withholding, church tax becomes mandatory to report in Form KAP.
Deadlines and key dates at a glance
Filing deadlines depend on your personal situation. Those filing voluntarily often have more time than those required to file.
Important dates
- Loss certificate: Request by December 15 of the current year
- Mandatory filing with refund interest 2025: by July 31, 2026
- Non-assessment certificate: Request before the start of the refund period
Frequently asked questions about the taxation of capital gains
Do I always have to report capital gains?
No. With purely domestic securities accounts and an appropriate exemption order for 2024, the bank handles the capital gains tax as a withholding tax. However, voluntary filing often makes sense.
How do I recover overpaid tax?
Via Form KAP. If the allowance was not fully utilized or your personal rate is below 25 percent, the tax office will refund the difference.
What happens with foreign returns?
They belong in your income tax return for capital gains, as no automatic withholding occurs. Tax withheld abroad is credited within limits.
Informed decisions for your own securities account
Those who understand the rules for capital gains taxation avoid costly oversights and recover money rightfully owed. Aktie.com supports private investors in German-speaking regions with clear investment guides and financial news so every securities account decision is based on solid information. A careful look at allowances, loss offsetting and deadlines pays off year after year.