Tax Allowance 2024: Saver's Allowance, Tax Exemption Request and How Investors Save Taxes

The saver's allowance for 2024 is €1,000 for single filers and €2,000 for married couples filing jointly. Up to this amount, capital gains such as interest, dividends and realized gains remain tax-free. If you set up a tax exemption request with your bank, you avoid the automatic deduction of capital gains tax and don't have to retrieve the money later through your tax return.

What a tax allowance means for capital investors

A tax allowance is an amount up to which income remains tax-free. Only the portion exceeding this allowance is taxed. This distinguishes it from a tax threshold, where the entire amount becomes taxable once exceeded. For the 2024 tax allowance on capital assets, the relevant term is saver's allowance.

Definition and explanation of the term

The definition is straightforward: up to the set limit, no taxes apply to capital gains. The saver's allowance covers all capital income, including interest from savings accounts, dividends from shares and distributions from funds and ETFs.

Distinction from the former saver's allowance

Until 2008, tax law separated the saver's allowance from a business expense allowance. These two amounts were merged. Today, the saver's allowance combines both functions. The old saver's allowance still appears in many guides, but it means the same thing.

Amount of the saver's allowance 2024

The current values have applied since 2023. Previously, the allowance was €801 for individuals and €1,602 for couples. With the increase, private investors now have more tax-free income available.

• Single filers: €1,000 per calendar year
• Married couples (joint filing): €2,000 per calendar year
• Previous amounts until 2022: €801 or €1,602

What falls under the allowance

The saver's allowance applies to all capital income. This includes interest, dividends, gains from the sale of securities and returns from investment funds. Returns from certain pension insurance policies may also qualify if they are considered capital income.

Capital gains tax on investment income

On capital gains above the allowance, capital gains tax applies. It amounts to 25 percent. This is plus the solidarity surcharge and, if applicable, church tax. For those not affiliated with a church, the effective tax rate with the solidarity surcharge is 26.375 percent.

How capital gains tax is withheld

The bank automatically deducts capital gains tax and remits it to the tax authority. This so-called withholding effect means: with the deduction, taxes on the relevant income are settled. An entry in the tax return is usually no longer necessary.

Solidarity surcharge and church tax in detail

The 5.5 percent solidarity surcharge is calculated on the capital gains tax, not on the earnings themselves. Church tax amounts to 8 or 9 percent of the tax liability, depending on the state. Banks inquire about religious affiliation via the tax ID and withhold church tax directly.

The tax exemption request as a key tool

With a tax exemption request, you instruct your bank not to tax capital gains up to the amount of your allowance. Without a tax exemption request, the institution deducts capital gains tax from the first euro. You would then have to reclaim overpaid taxes through your income tax return.

How the request works in practice

The tax exemption request is submitted directly to your bank or savings bank. Online, you usually do this via the Tax Information menu item or a similar area in your account. You specify the amount up to which earnings should be exempted. Your tax ID is mandatory.

Splitting tax exemption requests across multiple banks

If you have accounts and securities portfolios at different institutions, you may split the saver's allowance. The total of all tax exemption requests must not exceed the allowance. For a single person, that's €1,000 total, distributed according to your own estimate across the individual banks.

An example: You expect €600 in interest from your main bank and €400 in dividends from an online broker. Then you exempt €600 from the first and €400 from the second. The total exemption volume remains at €1,000.

When adjustment makes sense

If your earnings distribution shifts over the year, you should adjust the tax exemption requests. Existing requests can be changed or deleted at any time. A tax exemption request set too low costs you unnecessary liquidity, because the bank will then withhold capital gains tax.

Saving taxes with shares, ETFs and funds

Those building wealth should consistently use the allowance. Saving taxes with shares begins by exhausting the saver's allowance before you even pay capital gains tax. With a dividend yield of three percent, a portfolio of around €33,000 is enough to fill a single person's allowance with dividends alone.

Strategically managing earnings during the calendar year

Realized gains from shares count as capital income. You can time sales so that the annual allowance is used as fully as possible. If you don't exhaust the saver's allowance in one year, you lose it. Carryover to the next calendar year is not possible.

Investment funds and partial exemption

For investment funds and ETFs, an additional partial exemption applies. For equity funds, 30 percent of returns remain tax-free from the outset, regardless of the saver's allowance. Only the remaining portion is offset against the allowance and then taxed.

Offsetting losses and reducing taxes

Losses from securities transactions can be offset against gains. The bank maintains loss offset pools for this purpose, separated by shares and other capital income. Losses from shares may only be offset against gains from shares, an important rule in German tax law.

Using losses across bank boundaries

If you have losses at one bank and gains at another, request a loss certificate by December 15. With this certificate, you claim the losses in your tax return. The tax authority then offsets the amounts across institutions.

Tax return and beneficial assessment

Despite the withholding effect, it can be worthwhile to include capital income in your income tax return. If your personal tax rate is below 25 percent, request a beneficial assessment. The tax authority will then calculate using your lower rate and refund overpaid capital gains tax.

When beneficial assessment makes sense

Retirees and low-income individuals benefit especially. If taxable income falls below the basic exemption of €11,784 in 2024, all capital gains tax may be refunded. The assessment only occurs upon application in the tax return.

The non-assessment certificate

Those who permanently earn so little that no taxes apply can request a non-assessment certificate from the tax authority. You present this NV certificate to your bank. Capital gains above the saver's allowance are then paid out without capital gains tax being withheld.

Who the non-assessment certificate is suitable for

The non-assessment certificate is for people with low income, often in retirement. It typically applies for three years. If you expect high capital gains but have little other income, you save yourself the detour through the tax return.

Non-assessment certificate and pension insurance

Beneficiaries of pension insurance payments whose total income falls below the basic exemption can also use the certificate. The German Pension Insurance (DRV), the statutory pension provider, reports pension income to the tax authority. A non-assessment certificate prevents unnecessary withholding on capital income.

Special situations and exceptions

Besides the standard case, there are some exceptions investors should know about. With so-called counter transactions, the anonymous purchase of securities at the bank counter, neither the tax exemption request nor the usual regular withholding applies.

Counter transactions and their taxation

With counter transactions, the bank withholds a higher tax rate because the customer's tax ID is not on file. A tax exemption request cannot be used here. If affected, you reclaim overpaid amounts through your tax return.

Exemption for joint accounts

Married couples with a joint account can issue a joint tax exemption request for €2,000. With separate securities portfolios, they distribute the volume flexibly. The bank offsets both partners' earnings against the joint allowance.

Important terms around the saver's allowance

In connection with the taxation of capital assets, several terms appear that are often confused. A brief overview provides clarity:

• Saver's allowance: The annual allowance of €1,000 or €2,000.
• Tax exemption request: The instruction to the bank to exempt earnings up to the allowance from tax.
• Non-assessment certificate: Certificate for investors with income below the basic exemption.
• Capital gains tax: The flat 25 percent tax on capital income.

Business expenses and the allowance

Actual business expenses on capital income can no longer be claimed separately since the introduction of capital gains tax. The saver's allowance covers them in full. Higher expenses for managing the portfolio therefore remain unrecognized.

Practical steps for investors

For the 2024 tax allowance to have its full effect, a structured approach is worthwhile. This sequence has proven effective:

1. List all accounts and securities portfolios and estimate expected earnings.
2. Distribute tax exemption requests so that the total fully utilizes the allowance.
3. For low income, check whether a non-assessment certificate or beneficial assessment applies.
4. Use a certificate to offset losses across institutions.
5. Use the full range of online banking features for tax information and requests.

With this process, you secure full exemption and prevent your bank from unnecessarily withholding capital gains tax. Those who keep the topics of saver's allowance, tax exemption request and loss offsetting in mind get the maximum from the tax-free volume and significantly reduce the burden of capital gains tax.