Tax Allowance 2024: Savings Flat Rate, Tax Exemption Order and How Investors Save Taxes

The savings flat rate allowance in 2024 is 1,000 euros for single filers and 2,000 euros 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 order with your bank, you avoid the automatic deduction of capital gains tax and don't have to reclaim 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 figure is called the savings flat rate allowance.

Definition and explanation of the term

The definition is clear: up to the specified limit, no taxes apply to capital gains. The savings flat rate allowance covers all income from capital assets, including interest from savings accounts, dividends from stocks and distributions from funds and ETFs.

Distinction from the former savings allowance

Until 2008, tax law distinguished between the savings allowance and a deductible expenses flat rate. These two amounts were consolidated. Today, the savings flat rate allowance combines both functions. The old savings allowance still appears in many guides, but refers to the same thing.

Amount of the savings flat rate allowance for 2024

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

• Single filers: 1,000 euros per calendar year
• Married couples (joint filing): 2,000 euros per calendar year
• Previous values through 2022: 801 euros and 1,602 euros respectively

What falls under the allowance

The savings flat rate allowance applies to all capital income. This includes interest, dividends, gains from the sale of securities and income from investment funds. Income from certain annuities may also be included if they qualify as capital asset income.

Capital gains tax on investment income

Capital gains above the allowance are subject to capital gains tax. It amounts to 25 percent. In addition, there is the solidarity surcharge and, if applicable, church tax. Those not affiliated with a church pay an effective tax rate of 26.375 percent including the solidarity surcharge.

How capital gains tax is withheld

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

Solidarity surcharge and church tax in detail

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

The tax exemption order as a central tool

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

How the order works in practice

The tax exemption order is placed directly with your bank or savings bank. Online, you usually do this via a menu item like tax information or a similar section in your account. You specify the amount up to which income should be exempted from tax. Your tax ID is mandatory.

Splitting tax exemption orders across multiple banks

If you have accounts and portfolios at different institutions, you may split the savings flat rate allowance. The sum of all tax exemption orders must not exceed the allowance. For a single person, this totals 1,000 euros, distributed as you see fit across the individual banks.

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

When adjustment is worthwhile

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

Saving taxes with stocks, ETFs and funds

Those building wealth should use the allowance consistently. Saving taxes with stocks starts by maximizing the savings flat rate allowance before you pay any capital gains tax. With a dividend yield of three percent, a portfolio of around 33,000 euros is enough to fill a single person's allowance with dividends alone.

Deliberately timing realized gains in the calendar year

Realized gains from stock sales count as capital gains. You can time sales so that the annual allowance is used as fully as possible. If you don't exhaust the savings flat rate allowance in one year, you lose it. There is no carryover to the next calendar year.

Investment funds and partial exemption

Investment funds and ETFs have an additional partial exemption. For equity funds, 30 percent of income remains tax-free from the start, regardless of the savings flat rate 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. Your bank maintains loss offset accounts, separated by type of security. Losses from stocks may only be offset against gains from stocks—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 favorable tax assessment

Despite the withholding effect, entering capital gains in your income tax return can be worthwhile. If your personal tax rate is below 25 percent, request a favorable tax assessment. The tax authority then calculates using your lower rate and refunds overpaid capital gains tax.

When favorable tax assessment makes sense

Retirees and those with low incomes particularly benefit. If taxable income falls below the basic exemption of 11,784 euros in 2024, all capital gains tax can be refunded. The assessment only occurs upon request in the tax return.

The non-assessment certificate

Those who consistently earn so little that no taxes are due can request a non-assessment certificate from the tax authority. You present this NV certificate to your bank. Capital gains above the savings flat rate allowance are then paid out without capital gains tax withholding.

Who benefits from the NV certificate

The non-assessment certificate is for people with low income, often retirees. It generally applies for three years. If you expect high capital gains but have little other income, it saves you the detour through the tax return.

NV certificate and pension insurance

Recipients of pension insurance benefits whose total income falls below the basic exemption can also use the certificate. The statutory pension insurance reports pension benefits to the tax authority. An NV certificate prevents unnecessary withholding on capital income.

Special situations and exceptions

Beyond the standard case, there are some exceptions investors should know. With so-called over-the-counter transactions—anonymous purchases of securities at the bank counter—neither tax exemption orders nor regular withholding apply in the usual way.

Over-the-counter transactions and their taxation

With over-the-counter transactions, the bank withholds at an increased rate because the customer's tax ID is not on file. A tax exemption order cannot be applied here. Those affected reclaim overpaid amounts through their tax return.

Exemption for joint accounts

Married couples with a joint account can issue a joint tax exemption order for 2,000 euros. With separate portfolios, they distribute the volume flexibly. The bank offsets the income of both partners against the joint allowance.

Important terms related to the savings flat rate allowance

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

• Savings flat rate allowance: The annual tax allowance of 1,000 euros or 2,000 euros.
• Tax exemption order: An order to the bank to exempt income up to the allowance from tax.
• Non-assessment certificate: A certificate for investors with income below the basic exemption.
• Capital gains tax: The flat 25 percent tax on capital income.

Deductible expenses and the flat rate

Actual deductible expenses for capital income can no longer be claimed separately since the introduction of capital gains tax. The savings flat rate allowance covers them automatically. Higher costs for portfolio management therefore remain unrecognized.

Practical steps for investors

To make the 2024 tax allowance fully effective, a structured approach pays off. This sequence has proven successful:

1. List all accounts and portfolios and estimate expected income.
2. Distribute tax exemption orders so the total maximizes your allowance.
3. If income is low, check whether an NV certificate or favorable tax assessment applies.
4. Have losses offset across banks using a certificate.
5. Use the full functionality of online banking sections for tax information and orders.

This approach ensures you receive full tax exemption and prevents your bank from unnecessarily withholding capital gains tax. Those who keep track of the savings flat rate allowance, tax exemption order and loss offsetting get the maximum from their tax-free income and significantly reduce the burden of capital gains tax.