Optimize Exemption Order: Secure Your Saver's Allowance

An exemption order exempts capital gains up to the saver's allowance of 1,000 euros (singles) or 2,000 euros (married couples filing jointly) from withholding tax. To optimize your exemption order, strategically allocate this allowance to where the highest interest, dividends and capital gains are earned. Without such an order, your bank withholds 25 percent plus solidarity surcharge and remits it to the tax authority.

What is an exemption order?

An exemption order is a request to a German financial institution to exempt your capital gains up to a certain amount from taxation. The legal basis is the saver's allowance under § 20 Abs. 9 EStG, often also called the saver's exemption. If you do not submit such an order, your bank automatically deducts the withholding tax on capital gains.

Which income types are covered?

Eligible income includes interest from savings accounts and fixed-rate savings, dividends from stocks, distributions from funds and ETFs, and realized capital gains. The advance lump-sum allocation for accumulating ETFs is also covered by the exemption order.

The saver's allowance in detail

As of January 1, 2023, a higher saver's allowance 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 amounts remain unchanged in 2026.

How does an exemption order work?

Within your allowance, the bank pays out your gains in full. The withholding tax only applies to amounts exceeding this threshold. The bank reports the capital gains actually exempted via your tax ID to the German Federal Tax Office.

Withholding tax rates

Above the allowance, 25 percent withholding tax on capital gains plus 5.5 percent solidarity surcharge applies, effectively 26.375 percent. For church members, the tax burden is slightly reduced because church tax is considered a special expense.

Why tax ID is mandatory

Without your tax identification number, the bank cannot process the order. The tax identification number has been mandatory since 2011. If it is missing, the financial institution must deduct tax even though you have submitted an order.

How to submit an exemption order

Most financial institutions provide a form in their online banking platform. You enter the desired amount, confirm your tax identification number, and specify the duration. The order can be issued for a limited period or indefinitely, until revoked.

Information you will need

• Your valid tax ID and that of your co-account holder for joint accounts
• The amount to be exempted per institution
• Information about your church tax status for correct taxation

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

Distribute exemption order across multiple banks

If your financial assets are spread across multiple accounts and securities accounts, you must strategically allocate your allowance. An exemption order across multiple banks is explicitly permitted: you may split the saver's allowance across any number of institutions.

The decisive rule for allocation

The sum of all orders issued may not exceed your saver's allowance. If you allocate 700 euros to your online bank and 300 euros to your savings bank, you have fully utilized your 1,000 euro allowance. The German Federal Tax Office monitors this rule centrally.

How to correctly distribute your exemption order

Allocate your allowance to where the highest returns are expected. A savings account with high interest rates or a securities account with dividend-paying stocks deserves a larger share than a rarely used secondary account. A practical allocation for 1,000 euros looks like this:

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

This way, you prevent earnings from being unnecessarily taxed while allowance remains unused elsewhere.

Distribute saver's allowance and align your portfolio for tax efficiency

Distributing the saver's allowance is about putting the full allowance to work. Portfolio tax optimization begins with a realistic estimate of your expected capital gains per investment.

Estimate earnings realistically

Calculate what interest your fixed-rate savings will generate over its term and what dividends your stocks will provide. On this basis, you plan your allocation. If your investments change, adjust your order accordingly.

Keep track

Maintain a list of all exemption orders you have issued. This overview protects you from losing sight of things and accidentally exceeding the allowed amount. A quick look at each bank's annual tax certificate shows how much of your allowance was actually used.

Optimize exemption order before year-end

Unused saver's allowance expires at the end of the year. It cannot be carried forward to the next year. That is why an annual review is worthwhile, ideally in November or December.

Exhaust unused allowance

If allowance remains, you can strategically realize capital gains. Sell stocks or ETFs at a profit and repurchase them with sufficient time in between. This way, you utilize your allowance without fundamentally changing your investment strategy. Be mindful of transaction costs and allow sufficient time before repurchasing.

Final deadline in the year

Changes are possible at any time during the year, but generally not retroactively. The last business day of the bank, often December 28 or 29, is typically the final deadline for changes to take effect in the current year.

Can I change or revoke my exemption order online?

Yes. Through online banking, you can adjust the amount at any time during the current year or revoke the order entirely. A revocation takes effect from the moment of change, not for earnings already processed.

How high should I set the amount?

Set the amount so that it covers your expected capital gains at that institution without exceeding your overall limit. If set too low, you forfeit allowance. If distributed too high, you risk exceeding your limit.

Exemption order exceeded: What happens then?

If multiple banks together report more exempted capital gains than your saver's allowance permits, the excess will be flagged at the German Federal Tax Office. § 45d EStG requires financial institutions to report this.

Correction via tax return

You reclaim any gains that were incorrectly exempted through your income tax return. The tax authority will demand the withholding tax that was not paid. Conversely, if you overpaid tax because an order was missing, you can reclaim the money using Schedule KAP on your tax return.

No exemption order submitted: the consequences

According to an analysis cited by n-tv, about 16 percent of savers in Germany, or roughly one in six, do not submit an exemption order at all. They forfeit money because the bank automatically remits withholding tax on capital gains.

Get your money back

If you overpaid in previous years, reclaim the withholding tax through Schedule KAP on your tax return. The maximum annual savings is approximately 263.75 euros per person and about 527.50 euros for married couples.

Can an exemption order be changed retroactively?

For the current year, an exemption order issued in January generally applies retroactively to the beginning of the year. However, a previous year that has already ended cannot be corrected through the order.

Can I submit an order for the past year?

No. No order can be submitted retroactively for a previous year. The only way to obtain a refund after the fact is through your income tax return and Schedule KAP.

Submit exemption order for children

Children with their own securities account or savings account are also entitled to the full saver's allowance. Submit the order on behalf of the child using their tax identification number.

Watch the family insurance threshold

At approximately 5,460 euros in capital gains, the contribution-free family insurance coverage under statutory health insurance can be at risk. Check this threshold carefully if your child has significant capital assets.

Non-assessment certificate instead of exemption order

For individuals with very low income, a non-assessment certificate may be preferable to an exemption order. It exempts capital gains beyond the saver's allowance.

When a non-assessment certificate makes sense

If your income falls below the basic personal allowance of 11,784 euros (as of 2026), request a non-assessment certificate from the tax authority. Children, students, and pensioners with low income benefit because earnings are paid out entirely without tax withholding.

Preferential assessment: If your marginal tax rate is below 25 percent

If your personal marginal tax rate is below 25 percent, request preferential assessment through Schedule KAP. The tax authority will then tax your capital gains at your lower individual rate instead of the flat-rate withholding tax.

Exemption order with multiple financial institutions: Special cases

Not every provider accepts an exemption order. Brokers not based in Germany do not provide exemption; you report the earnings yourself on your tax return.

Accumulating ETFs and advance allocation

With accumulating ETFs, there is no distribution, and tax only arises upon sale. However, an annual advance lump-sum allocation is charged, calculated from the base interest rate times the fund value. An existing exemption order covers this allocation.

Married couples and shared allowance

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

Calculate exemption order: a simple procedure

For managing your finances effectively, a three-step approach works well. It ensures that no allowance is wasted and no limit is exceeded.

1. List all securities accounts and savings accounts and estimate expected capital gains for each investment.
2. Allocate the saver's allowance proportionately, with larger amounts going to high-yield institutions.
3. At year-end, review how much you have utilized and, if needed, rebalance or realize gains.

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

Common mistakes in portfolio tax optimization

Many investors set up their order once and never adjust it, even though accounts and earnings have long since changed. Others allocate the entire allowance to their main bank while high gains at their broker go untaxed.

These points deserve regular review

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

Optimize exemption order: key figures

For reference, here are the central values for 2026:

• Saver's allowance, singles: 1,000 euros per year
• Saver's allowance, couples: 2,000 euros per year
• Withholding tax on capital gains: 25 percent plus 5.5 percent solidarity surcharge
• Effective burden: approximately 26.375 percent above the allowance
• Maximum savings: up to 263.75 euros per person

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

Quick summary for your practice

Review once a year whether your allowance flows to where interest and dividends are highest. Keep your allocation in writing and adjust your order whenever you make a major change to your investments. This way, your capital gains remain reliably tax-free up to the saver's allowance, and the tax authority only sees what is left over.