ETF Annual Tax Allowance 2026: Calculation, Amount and Tax Deduction Explained

The ETF annual tax allowance 2026 is an annual minimum tax on accumulating funds, anchored in the Investment Tax Act since 2018. For 2026, the base rate rises to 3.20 percent, the highest value since its introduction.

For an accumulating equity ETF with a fund value of 50,000 euros, this results in approximately 206.76 euros of tax, due in early January 2027. The bank managing the account automatically deducts the amount.

What is the annual tax allowance?

The annual tax allowance is not its own type of tax, but rather a notional return value. The tax authorities levy capital gains tax on this value. The rule is anchored in § 18 InvStG, in force since January 1, 2018.

Its purpose: Even those who hold accumulating investment funds, that is, shares without regular distributions, pay a minimum amount of capital gains tax each year.

Without this rule, investors could defer taxation of their gains for decades, until selling the shares. It is precisely this tax deferral effect that the Investment Tax Act prevents.

Important for your planning: When you later sell the fund shares, all previously paid annual tax allowances are credited against the gain on sale. Double taxation does not occur.

When is no annual tax allowance due?

The annual tax allowance does not always apply. It is waived in clearly defined cases, and this can significantly reduce your tax burden. Three situations are decisive:

• The fund records a price decline over the calendar year. With negative performance, no annual tax allowance is due.
• The base rate is negative, as in 2022 with minus 0.05 percent. In such years, there is no annual tax allowance.
• The actual value increase falls below the base return. Then the lower amount is applied.

The annual tax allowance can never be negative. It is always capped at the real value growth. If you make no profit on your shares in the current year, you pay no annual tax allowance for that year.

The base rate 2026 as a key metric

The base rate determines the amount of the annual tax allowance. The Federal Ministry of Finance sets it annually, derived from the yield of long-term public bonds based on the interest rate structure data of the German Bundesbank. For 2026, a base rate of 3.20 percent applies (BMF letter dated 13.01.2026).

The base return amounts to 70 percent of the base rate, so 2.24 percent for 2026. The development over the past years shows a clear increase:

• 2023: Base rate 2.55 percent, base return 1.785 percent
• 2024: Base rate 2.29 percent, base return 1.603 percent
• 2025: Base rate 2.53 percent, base return 1.771 percent
• 2026: Base rate 3.20 percent, base return 2.240 percent

The value 3.20 is thus the highest since 2018. For investors, this means: The annual tax allowance rises noticeably compared to the previous year, because the base rate has climbed from 2.53 to 3.20 percent. This increase of 0.67 percentage points compared to the 2.53 percent of the previous year directly impacts the tax due.

How is the annual tax allowance calculated?

The calculation follows a fixed formula. The starting point is the first redemption price of the calendar year, that is, the value at share acquisition at the start of the year. This is multiplied by 70 percent of the base rate. The result is the base return.

From this value, you deduct step by step:

1. the distributions during the year,
2. a 1/12 of the base return for each full month before share acquisition,
3. the partial exemption depending on the fund type.

What remains is the taxable annual tax allowance. The capping rule is decisive: the base return and the actual value increase are compared. The lower of the two values applies. If the redemption price rises only slightly, the annual tax allowance remains small.

Example calculation for an accumulating equity ETF

A concrete calculation example makes the ETF annual tax allowance 2026 tangible:

• Fund value on 01.01.2026: 50,000 euros
• Value increase until 31.12.2025 calculated for the following year: 4,000 euros
• Distributions: 0 euros
• Base return: 50,000 × 3.20% × 70% = 1,120 euros

Since the base return of 1,120 euros is below the value increase of 4,000 euros, the annual tax allowance is 1,120 euros. After deducting the 30 percent partial exemption for equity funds, 784 euros remain taxable.

At a tax rate of 26.375 percent, this results in approximately 206.76 euros of tax, due in January 2026 calculated for the following year 2027. If the fund value on 31.12.2025 had risen by only 500 euros, due to the cap a significantly lower value would result.

If the same pattern is applied to a larger portfolio, the effect of the higher base rate becomes clear. At 60,000 euros of fund value and full value growth, the base return is 1,344 euros. After the 30-percent partial exemption, 940.80 euros remain, which at 26.375 percent results in approximately 264 euros of tax. Without the tax exemption order, the bank would directly deduct these 264 euros.

Partial exemption: What does this mean for your taxes?

The partial exemption is a compensation for the fact that funds at the level of their returns already carry tax burdens. A fixed percentage of your gains remains tax-free. How high this deduction is depends on the equity share of the fund.

• Equity funds (at least 51 percent equity share): 30 percent partial exemption
• Mixed funds (at least 25 percent equity share): 15 percent partial exemption
• Domestic real estate funds (at least 51 percent real estate): 60 percent
• Foreign real estate funds: 80 percent

The partial exemption applies to both the annual tax allowance and distributions and the gain on sale when selling.

A broadly diversified equity ETF thus benefits doubly: it typically meets the 51-percent threshold and secures the full partial exemption of 30 percent on all capital gains. A mixed fund with around 30 percent equities, on the other hand, only gets 15 percent, and a pure bond fund gets zero.

Why the partial exemption exists at all

Before 2018, foreign dividends and other fund gains were sometimes treated differently. With the reform of the Investment Tax Act, the fund itself pays a corporate tax of 15 percent on domestic dividends.

The partial exemption offsets this tax burden for the investor. Without it, there would be economic double taxation of the same gains. This affects both pure equity investment funds and mixed funds and real estate funds.

Tax rate, capital gains tax and due date for the ETF annual tax allowance 2026

The taxable annual tax allowance is subject to capital gains tax. The total rate consists of 25 percent withholding tax plus 5.5 percent solidarity surcharge on top. In total, this results in an overall burden of 26.375 percent. Those who are liable for church tax pay additional church tax.

The solidarity surcharge on withholding tax has not been abolished for capital gains; it continues to apply in full. This is why the effective rate of 26.375 percent remains the relevant calculation figure.

The annual tax allowance for 2026 is deemed to have accrued on the first business day of the following year, that is, January 4, 2027. Only then does it become tax-relevant.

The bank managing your account takes over the complete calculation for a domestic account and directly remits the tax to the tax authority. You do not need to separately declare these capital gains; the tax authority receives the data automatically.

The deduction from your settlement account

The tax deduction runs through your settlement account. This is exactly where the most common pitfall occurs: if there is insufficient balance on the settlement account in January, the bank cannot deduct the tax due. As a result, it may sell shares or demand payment.

Therefore, ensure sufficient funds on your settlement account at year-end. Many investors are surprised when an unexpected deduction occurs in January and cannot explain the connection.

Check your tax assessment and your annual tax statement; the annual tax allowance appears separately there. In the next tax assessment you can also see how the tax was credited.

Use saver's tax allowance and tax exemption order

The saver's tax allowance is your most important tool for making practical progress on saving taxes on stocks and funds. It is 1,000 euros per person, 2,000 euros for joint taxation. Up to this limit, your capital gains remain tax-free.

For a married couple with a combined exemption of 2,000 euros, the annual tax allowance calculated above of 784 euros thus remains completely tax-free as long as no other capital gains occur. Anyone serious about saving taxes on stocks strategies will deliberately exhaust this amount.

For the bank to automatically apply the saver's tax allowance, you need a tax exemption order. Without this order, it deducts tax on the full annual tax allowance, even if your exemption has not yet been exhausted. Practical tips:

• Distribute the tax exemption order sensibly across multiple banks if you maintain multiple accounts. With two accounts, you can split the total into, for example, 700 and 300 euros.
• Even for children with their own account, a separate tax exemption order can be filed.
• A tax exemption order can be adjusted during the year; you can thus increase it retroactively.

Loss offset and foreign account

If your fund later incurs losses, the paid annual tax allowance is not directly refunded. Instead, it increases the tax-recognized loss in the offset pool.

This loss offset later reduces your gains from other stocks or investment funds. With multiple accounts with different gain and loss situations, it is worthwhile to review via your tax return.

It is different for an ETF in a foreign account without German tax reporting. Then you must calculate the annual tax allowance yourself and declare it in your income tax return.

The capital gains belong in Annex KAP of your income tax return. Tax software helps with correct entry, as do freely available calculators that determine the base return and the tax due. Many income tax programs now handle the calculation automatically.

The role of the fund company and your bank

The fund company provides the data on redemption price and distributions. Your domestic bank uses this information, performs the calculation and handles the tax deduction. For most private investors, the taxation remains largely in the background.

Concrete tax tips for your investments: Keep funds available on your settlement account at year-end. File a tax exemption order before the first deduction occurs.

Keep your annual tax statement in view to track the capital gains. Further tax tips for long-term investing help you put the annual burden of around 0.33 percent of the fund value into perspective and select the appropriate tax software for your situation.

How high is the tax on ETFs from 2026?

For a typical accumulating equity ETF, 2026 sees an effective burden of around 0.33 percent of the fund value, before applying the saver's tax allowance. This figure arises from the base return of 2.24 percent, the 30-percent partial exemption, and the rate of 26.375 percent.

For a portfolio of 100,000 euros and full value growth, the tax thus comes to approximately 354.20 euros. These 354.20 euros arise from the base return of 2,240 euros, less partial exemption, taxed at the effective rate. At 150,000 euros, the burden is correspondingly higher.

Those who only invest in an ETF savings plan and have filed the tax exemption order often pay no tax on the annual tax allowance initially.

Only when your total returns from stocks, dividends, and capital gains exceed 1,000 euros (or 2,000 euros for joint taxation) does the real burden apply. This makes ETF taxes predictable for small investors for years. Even the mentioned 354.20 euros can often still be offset with a combined exemption of 2,000 euros.

For savings plans: pro-rata calculation per purchase date

With monthly contributions, the calculation becomes more complex. For each purchase date, the 1/12 rule applies: for each full month before share acquisition, the base return is reduced proportionally.

A share purchased in July carries only half the base return for that year, one purchased in October only a quarter. Someone who invests 500 euros in December thus contributes almost nothing to the annual annual tax allowance. The domestic bank handles this allocation automatically, so your tax burden is precisely adjusted to the actual holding period.

Key takeaways on the annual tax allowance

The annual tax allowance affects more investors in 2026 due to the base rate rising to 3.20 percent, compared to previous years when it was still at 2.53 percent. Those who understand the mechanics of partial exemption, the process through the settlement account, and the effect of the saver's tax allowance will keep their ETF taxes under control.

A timely filed tax exemption order and sufficient funds on the settlement account are sufficient in most cases to process the annual tax smoothly. The base rate of 3.20 percent remains the central metric on which the entire yield calculation after taxes is based.