Optimize tax exemption orders: secure your savings allowance

A tax exemption order keeps capital gains up to the savings allowance of €1,000 (single filers) or €2,000 (married couples filing jointly) exempt from capital gains tax. Those who want to optimize the tax exemption order strategically allocate this exemption to where the highest interest, dividends and capital gains accrue. Without an order, the bank retains 25 percent plus solidarity surcharge and remits the amount to the tax office.

What is a tax exemption order?

The tax exemption order is a request to a German credit institution to keep your capital gains up to a certain amount tax-free. The legal basis is the savings allowance under § 20 para. 9 EStG, often also called savings exemption. If you do not issue an order, your bank automatically deducts the capital gains tax.

What income falls under this?

Tax-exempt income includes interest from savings accounts and fixed-term deposits, dividends from stocks, distributions from funds and ETFs, and realized capital gains. The preliminary distribution from accumulating ETFs is also covered by the tax exemption order.

The savings allowance in detail

Since January 1, 2023, a higher savings allowance applies. €801 became €1,000 for single filers and €1,602 became €2,000 for married couples. These amounts remain unchanged in 2026.

How does a tax exemption order work?

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

Amount of capital gains tax

Above the exemption, 25 percent capital gains tax plus 5.5 percent solidarity surcharge apply, effectively 26.375 percent. For church members, the tax burden is slightly reduced because church tax is treated as a special expense.

Why the tax ID is mandatory

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

How to issue the tax exemption order

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

Information you need

• Your valid tax ID of both account holders for joint investments
• 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, provided the order is issued during the current year.

Distribute tax exemption orders across multiple banks

Those who spread their assets across multiple accounts and securities accounts must strategically split the exemption. Issuing tax exemption orders at multiple banks is explicitly permitted: you may split the savings allowance across any number of institutions.

The decisive rule for allocation

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

How to properly distribute the tax exemption order

Allocate the exemption where you expect the highest earnings. A savings account with high interest income or a securities account with dividend-paying stocks deserves a larger portion than a rarely used secondary account. A practical allocation for €1,000 looks like this:

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

This prevents earnings from being unnecessarily taxed while exemption remains unused elsewhere.

Distribute savings allowance and align portfolio for tax efficiency

When allocating the savings allowance, the goal is to make your entire exemption work. Portfolio tax optimization begins with an honest estimate of your expected capital gains per investment.

Estimate earnings realistically

Calculate what interest your fixed-term deposit will generate over its term and what dividends your stocks will pay. Based on this, plan the allocation. If your investments change, adjust the order.

Keep track

Maintain a list of all tax exemption orders issued. This overview prevents 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 tax exemption order before year-end

Unused savings allowance expires at year-end. It cannot be carried forward to the following year. Therefore, an annual review in November or December is worthwhile.

Fully utilize unused exemption

If exemption remains, you can deliberately 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. Pay attention to transaction costs and allow sufficient time between sale and repurchase.

Final deadline in the year

Changes are possible at any time during the year, but usually not retroactively. The last bank business day, often December 28 or 29, is usually the final deadline to have an effect for the current year.

Can I change or revoke the tax exemption order online?

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

How high should the amount be set?

Set the amount so it covers your expected capital gains at each institution without exceeding the overall limit. Set too low, you waste exemption. Distributed too high, you risk exceeding the limit.

Tax exemption order exceeded: What happens then?

If multiple banks report more exempted capital gains combined than your savings allowance permits, the excess is flagged at the Federal Tax Office. Section 45d EStG requires credit institutions to make this report.

Correction through tax return

Gains that were exempted when they shouldn't have been are corrected via your income tax return. The tax office will demand the capital gains tax that was improperly unpaid. Conversely, if you overpaid tax because an order was missing, you can recover the funds via Schedule KAP.

No tax exemption order issued: the consequences

About 16 percent of savers in Germany, or one in six, issue no tax exemption order according to an evaluation cited by n-tv. This means wasting money because the bank automatically remits capital gains tax.

Recover money

If you overpaid in previous years, recover the capital gains tax via Schedule KAP of your tax return. Maximum annual savings amount to roughly €263.75 per person and about €527.50 for married couples.

Can a tax exemption order be changed retroactively?

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

Can the order be issued for the past year?

No. No order is possible retroactively for a past year. The only way to obtain subsequent reimbursement is through the income tax return and Schedule KAP.

Issue tax exemption order for children

Children with their own securities account or savings account are also entitled to the full savings allowance. Issue the order in the child's name using their tax identification number.

Observe the family insurance threshold

Starting at approximately €5,460 in capital gains, the family insurance coverage under statutory health insurance may be jeopardized. Carefully review this threshold if the child has larger assets.

Non-assessment certificate instead of tax exemption order

For individuals with very low income, a non-assessment certificate may be more suitable than a tax exemption order. It exempts capital gains beyond the savings allowance.

When the non-assessment certificate is worthwhile

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

Favorable assessment: When your marginal tax rate is below 25 percent

If your personal marginal tax rate is below 25 percent, request a favorable assessment via Schedule KAP. The tax office will then tax your capital gains at your lower individual rate instead of the flat-rate capital gains tax.

Tax exemption order at multiple credit institutions: special cases

Not every provider accepts a tax exemption order. Brokers without a German location do not process exemptions; you report the earnings yourself in your tax return.

Accumulating ETFs and preliminary distribution

With accumulating ETFs, there is no distribution; the tax only arises upon sale. However, a preliminary distribution is calculated annually based on base interest rate times fund value. An existing tax exemption order covers this distribution.

Married couples and joint exemption

Married couples issue a joint order for €2,000, regardless of who generates the earnings. An order for €0 can enable loss offset across spouses, for example when one spouse's capital losses are offset against the other's gains.

Calculate tax exemption order: a simple approach

For keeping finances in order, a three-stage approach works well. It ensures that no exemption is lost and no excess occurs.

1. List all securities accounts and accounts and estimate expected capital gains per investment.
2. Allocate the savings allowance proportionally, with larger amounts to high-earning institutions.
3. Review utilization at year-end and rebalance or realize gains if necessary.

This brief overview does not replace tax advice, but provides reliable guidance in practice.

Common mistakes in portfolio tax optimization

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

These points deserve regular attention

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

Optimize tax exemption order: key figures

For context, here are the key values for 2026:

• Savings allowance for single filers: €1,000 per year
• Savings allowance for couples: €2,000 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 per person

Those who know these figures and consistently use the savings exemption extract maximum tax-free income from their capital assets. A properly maintained tax exemption order across all credit institutions is the simplest tool for this.

Quick summary for your practice

Review once a year whether your exemption flows to where interest and dividends are highest. Keep the allocation in writing and adjust the order whenever your investments change significantly. This keeps your capital gains tax-free up to the savings allowance reliably, and the tax office only sees what remains.