Optimize Freistellungsauftrag: Secure Your Sparerpauschbetrag

A Freistellungsauftrag exempts capital income up to the Sparerpauschbetrag of 1,000 euros (singles) or 2,000 euros (married couples filing jointly) from capital gains tax. Those who want to optimize their Freistellungsauftrag allocate this tax exemption strategically to where the highest interest, dividends, and capital gains accrue. Without such an order, the bank retains 25 percent plus solidarity surcharge and forwards the amount to the tax office.

What is a Freistellungsauftrag?

The Freistellungsauftrag is a request to a German credit institution to exempt your capital income up to a certain amount from taxation. The legal basis is provided by the Sparerpauschbetrag according to § 20 Abs. 9 EStG, often called the saver's exemption. If you do not issue such an order, your bank automatically withholds capital gains tax.

Which income falls under this?

Exempt income includes interest from savings accounts and fixed-term deposits, dividends from stocks, distributions from funds and ETFs, as well as realized capital gains. The pre-distribution on accumulating ETFs is also covered by the Freistellungsauftrag.

The Sparerpauschbetrag in detail

As of January 1, 2023, a higher Sparerpauschbetrag applies. The amount increased from 801 euros to 1,000 euros for singles and from 1,602 euros to 2,000 euros for married couples. These values remain unchanged in 2026.

How does a Freistellungsauftrag work?

Within your tax exemption, the bank pays out your income in full. Only above this threshold does capital gains tax apply. The bank reports the capital income actually exempted via your tax ID to the Federal Central Tax Office.

Capital gains tax rate

Above the exemption threshold, capital gains tax of 25 percent plus 5.5 percent solidarity surcharge applies, effectively 26.375 percent. Church members benefit slightly, as church tax is considered a special deduction.

Why tax ID is mandatory

Without providing your tax identification number, the bank cannot process the order. The tax identification number has been mandatory since 2011. If it is missing, the credit institution must withhold taxes, even though an order is in place.

How to issue the Freistellungsauftrag

Most credit institutions provide a form in online banking. You enter the desired amount, confirm your tax identification number, and specify the term. The order can be issued for a fixed period or indefinitely, i.e., until revoked.

Information you need

• Your valid tax ID and that of the other account holder for joint investment
• The amount to be exempted per institution
• Information on church tax liability for correct taxation

After submission, the exemption usually applies retroactively to the beginning of the year if the order is issued in the current year.

Distributing the Freistellungsauftrag across multiple banks

If you spread your financial assets across multiple accounts and portfolios, you must allocate your exemption strategically. Issuing a Freistellungsauftrag to multiple banks is explicitly permitted: you may split the Sparerpauschbetrag across any number of institutions.

The key rule for allocation

The sum of all issued orders must not exceed the Sparerpauschbetrag. If you allocate 700 euros at your online bank and 300 euros at your savings bank, you have fully utilized your 1,000 euro exemption. This rule is monitored centrally by the Federal Tax Office.

How to distribute your Freistellungsauftrag correctly

Allocate your exemption to where the highest income is expected. A savings account with high interest or a portfolio with dividend stocks deserves a larger share than a rarely used secondary account. A practical allocation for 1,000 euros looks like this:

• ETF portfolio with dividends and distributions: 600 euros
• Savings account with ongoing interest: 250 euros
• Fund savings plan: 150 euros

This prevents income from being unnecessarily taxed while exemption goes unused elsewhere.

Distributing the Sparerpauschbetrag and aligning your portfolio for tax purposes

When distributing the Sparerpauschbetrag, the goal is to put your entire exemption to work. Portfolio tax optimization begins with a realistic estimate of your expected capital income per investment.

Estimate income realistically

Calculate what interest your fixed-term deposits will generate over their term and what dividends your stocks will pay. Based on this, plan your allocation. If your investment strategy changes, adjust your order accordingly.

Keep track

Maintain a list of all issued Freistellungsaufträge. This overview protects you from losing track and accidentally distributing more than the permitted amount. A quick look at each bank's annual tax certificate shows how much exemption was actually used.

Optimize your Freistellungsauftrag before year-end

Unused Sparerpauschbetrag expires at the end of the year. It cannot be carried over to the following year. Therefore, an annual review is worthwhile, ideally in November or December.

Exhaust unused exemption

If exemption remains unused, you can strategically realize capital gains. Sell stocks or ETFs at a profit and repurchase them after a time interval. This uses your exemption without fundamentally changing your investment strategy. Pay attention to transaction costs and allow sufficient time before repurchasing.

Final deadline in the year

Changes are possible any time during the year, but usually not retroactively. The last banking day, often December 28 or 29, is usually the final deadline for changes to take effect in the current year.

Can I change or revoke the Freistellungsauftrag online?

Yes. Through online banking, you can adjust the amount at any time during the year or revoke the order completely. A revocation takes effect from the time of the change, not for income already settled.

How high should you set the amount?

Set the amount so that it covers your expected capital income at each institution without exceeding your overall limit. If set too low, you waste exemption. If distributed too high, you risk an overage.

Freistellungsauftrag exceeded: What happens then?

If multiple banks report more exempted capital income than your Sparerpauschbetrag permits, the overage is detected by the Federal Central Tax Office. Section 45d EStG requires credit institutions to report this.

Correction through your tax return

Income incorrectly exempted from tax is recaptured through your income tax return. The tax office demands payment of capital gains tax that was wrongly unpaid. Conversely, if you overpaid because an order was missing, you recover this through Schedule KAP in your tax return.

No Freistellungsauftrag issued: the consequences

According to a survey cited by n-tv, approximately 16 percent of savers in Germany, or one in six, issue no Freistellungsauftrag at all. They lose money in the process because the bank automatically remits capital gains tax.

Recover overpaid taxes

If you overpaid in previous years, recover capital gains tax through Schedule KAP in your tax return. The maximum annual saving is approximately 263.75 euros per person and about 527.50 euros for married couples.

Can a Freistellungsauftrag be changed retroactively?

For the current year, an exemption issued in January usually applies retroactively to the beginning of the year. However, a completed prior year cannot be corrected through the order.

Can an order be issued for a past year?

No. An order cannot be issued retroactively for a past year. The only way to obtain a refund is through your income tax return and Schedule KAP.

Issue a Freistellungsauftrag for children

Children with their own portfolio or savings account also have a right to the full Sparerpauschbetrag. Issue the order on behalf of the child using their tax identification number.

Observe the limit for family insurance

At approximately 5,460 euros in capital income, family insurance coverage under statutory health insurance may be at risk. Carefully review this threshold if the child has substantial capital assets.

Non-assessment certificate instead of Freistellungsauftrag

For individuals with very low income, a non-assessment certificate may be more advantageous than a Freistellungsauftrag. It exempts capital income beyond the Sparerpauschbetrag from taxation.

When a non-assessment certificate is worthwhile

If your income is below the basic exemption of 11,784 euros (as of 2026), request a non-assessment certificate from your tax office. Children, students, and retirees with low income benefit because income is paid out entirely without tax withholding.

Favourable assessment: If your personal tax rate is below 25 percent

If your personal marginal tax rate is below 25 percent, request a favourable assessment through Schedule KAP. The tax office then taxes your capital income at your lower individual rate rather than the flat capital gains tax.

Freistellungsauftrag with multiple credit institutions: special cases

Not every provider accepts a Freistellungsauftrag. Brokers without a German office do not process exemptions; you report the income yourself in your tax return.

Accumulating ETFs and pre-distribution

With accumulating ETFs, there is no distribution; tax only arises upon sale. However, an annual pre-distribution applies, calculated as the base interest rate times fund value. An existing Freistellungsauftrag covers this pre-distribution.

Married couples and shared exemption

Married couples issue a joint order for 2,000 euros, regardless of who generates the income. An order for 0 euros can enable cross-spouse loss offsetting, such as when one spouse's capital losses offset the other's gains.

Calculate your Freistellungsauftrag: a straightforward approach

For financial management, a three-step process works well. It ensures no exemption is wasted and no overage occurs.

1. List all portfolios and accounts and estimate expected capital income per investment.
2. Allocate the Sparerpauschbetrag proportionally, with larger amounts to high-yield institutions.
3. Review utilization at year-end and rebalance or realize gains if needed.

This brief overview does not replace tax advice but provides reliable practical guidance.

Common mistakes in portfolio tax optimization

Many investors set up the order once and never adjust it, even though their accounts and income have changed significantly. Others allocate their entire exemption to their main bank while high gains at their broker remain untaxed.

These points deserve regular review

• Outdated amounts that no longer match current investments
• Missing tax ID, which renders the entire order ineffective
• Overlooked interest income on a newly opened savings account
• Double allocation without overview of the total

Optimize your Freistellungsauftrag: key figures

For reference, here are the central values for 2026:

• Sparerpauschbetrag for singles: 1,000 euros per year
• Sparerpauschbetrag for couples: 2,000 euros per year
• Capital gains tax: 25 percent plus 5.5 percent solidarity surcharge
• Effective burden: approximately 26.375 percent above the exemption
• Maximum savings: up to 263.75 euros per person

Those who know these figures and consistently use the saver's exemption maximize tax-free income from their capital assets. A well-maintained Freistellungsauftrag across all credit institutions is the simplest tool for this.

Quick summary for your practice

Review annually whether your exemption is allocated to where interest and dividends are highest. Keep your allocation documented and adjust the order whenever you make significant changes to your investments. This ensures your capital income remains reliably tax-free up to the saver's exemption, and the tax office only sees what is left over.