Abgeltungssteuer in Germany: tax on interest, dividends, and ETFs in 2026

Abgeltungssteuer is the German tax on private capital income: interest on accounts, dividends, bond coupons, profits from selling securities, fund distributions, and many ETF-related gains. With German banks and brokers, the tax is usually withheld automatically. With foreign accounts and brokers, it often has to be handled through the tax return.

The basic logic is simple: first the annual tax-free allowance Sparer-Pauschbetrag is applied, then Kapitalertragsteuer/Abgeltungssteuer is withheld from the taxable portion. But the details matter: church tax, Freistellungsauftrag, the ETF Vorabpauschale, loss offsetting, and Anlage KAP can noticeably change the final result.

In short: how much is withheld

The basic Abgeltungssteuer rate is 25% of taxable capital income. On top of that, a Solidaritatszuschlag of 5.5% of the tax amount is charged. If the investor belongs to a religious community that levies Kirchensteuer, church tax is added.

Situation	Approximate total burden on the taxable portion	What it means
Without church tax	26.375%	25% tax plus Solidaritatszuschlag
Kirchensteuer 8%	about 27.82%	Usually Bavaria and Baden-Wurttemberg
Kirchensteuer 9%	about 27.99%	Usually the other federal states

If a German bank withholds the tax itself, the interest, dividends, or sale proceeds arrive after deduction. In a typical situation, such income does not have to be entered separately in the tax return. Exceptions arise, for example, if the tax was withheld incorrectly, the income came through a foreign broker, or you want to check whether Gunstigerprufung would give you more favorable taxation.

Example without church tax: if taxable interest income is 300 euros and no Sparer-Pauschbetrag remains, the withholding will be 79.13 euros, and 220.87 euros will reach the account.

Which income falls under Abgeltungssteuer

For a private investor, Kapitalertrage usually include:

• interest on bank accounts and deposits: Girokonto, Tagesgeld, Festgeld, Sparbuch;
• dividends on shares;
• coupons on bonds and other interest-bearing securities;
• distributions from investment funds and ETFs;
• profits from selling shares, bonds, funds, and ETFs;
• income from many brokerage products, including options, CFDs, and other derivatives;
• income on foreign deposits and brokerage accounts if the owner is a German tax resident.

Cryptocurrencies and private real-estate sales usually do not fall under Abgeltungssteuer. Separate rules apply to them, so the logic of tax on interest, dividends, and ETFs cannot be transferred automatically.

Sparer-Pauschbetrag: the tax-free allowance

In 2026, the Sparer-Pauschbetrag is 1000 euros per year for one person and 2000 euros for spouses or registered partners who are taxed jointly. It is one combined limit for all capital income in the calendar year, not a separate allowance for each bank.

If your capital income for the year stays within the limit, no tax is ultimately due on it. If the limit is exceeded, tax is paid only on the amount above it. Actual custody, advisory, or banking costs for private investors usually cannot be deducted additionally: the Sparer-Pauschbetrag replaces that deduction.

It is important to allocate the allowance carefully. If you set up Freistellungsauftrag instructions with several banks for a total above the permitted limit, this does not increase the tax-free amount and can lead to questions from the Finanzamt.

Freistellungsauftrag and NV-Bescheinigung

A Freistellungsauftrag is an instruction to the bank or broker not to withhold tax within the specified share of the Sparer-Pauschbetrag. It can usually be set up in online banking, in the broker app, or on a paper form.

If you have both a deposit account and a brokerage account in Germany, the allowance can be split between them. The amount may be changed, but the total across all Freistellungsauftrag instructions must not exceed 1000 euros per person or 2000 euros per couple.

Instrument	When it fits	What it gives
Freistellungsauftrag	Capital income is received through a German bank or broker	Tax is not withheld immediately within the specified allowance
NV-Bescheinigung	Total annual income is so low that no income tax arises	The bank may avoid withholding tax even above the Sparer-Pauschbetrag
Anlage KAP	Tax was withheld twice, not withheld at all, or income came from abroad	Lets you declare the income and recover an overpayment

An NV-Bescheinigung is requested from the Finanzamt. It is often useful for children with savings, students, pensioners with low income, and other people whose total annual income is below the taxable level. If circumstances change and the entitlement to the certificate disappears, it must no longer be used.

A child can have their own Sparer-Pauschbetrag. For a child’s account or custody account, a separate Freistellungsauftrag is issued with the child’s tax ID; the child’s allowance does not use up the parents’ allowance.

When Anlage KAP is needed

Anlage KAP may be necessary or advantageous if:

• capital income came through a foreign bank, deposit, or broker that did not withhold German tax;
• a German bank withheld too much because no Freistellungsauftrag was set up or the allowance was allocated poorly;
• church tax was not withheld automatically even though there is an obligation;
• foreign tax must be claimed for credit under a double taxation agreement;
• your personal income tax rate is below 25% and you want to request Gunstigerprufung;
• fund income requires separate reporting, for example through Anlage KAP-INV.

For more on filing documents, see tax return in Germany. If you moved to Germany in the middle of the year and kept foreign accounts, it is especially important to determine when tax residency began: this affects which income must be shown in the return. See also taxes in Germany in the year of moving.

Foreign tax does not always mean double taxation. But it does not remove the obligation to report the income correctly in Germany if you became a German tax resident.

ETFs and Vorabpauschale: why tax is charged without a sale

With ETFs in Germany, tax can arise even without selling units. The reason is the Vorabpauschale, a notional minimum income for investment funds. For 2026, the BMF set the Basiszins at 3.20%; the Vorabpauschale for 2026 itself is treated as received by the investor on the first working day of 2027.

In practice, this is most noticeable with accumulating ETFs: no cash distribution arrives, but the broker may still withhold tax. If there is no free cash in the account, a small January debit becomes an unpleasant surprise. If a Freistellungsauftrag was arranged in advance and the allowance has not yet been used up, the tax may be covered by the allowance.

For many funds, Teilfreistellung applies, a partial tax exemption for income. For equity funds, 30% of income is usually exempt for private investors; for mixed funds, 15% is exempt. That is why the tax burden on ETFs should not be compared directly with the tax on a normal bank deposit.

Do capital gains affect the tax rate on salary

Usually no. Abgeltungssteuer is a separate regime for taxing capital income, so interest and dividends do not by themselves increase the progressive tax rate on salary.

But there are exceptions. Under Gunstigerprufung, the Finanzamt compares the tax already withheld with your personal tax rate and chooses the more favorable option. In addition, some social calculations, such as eligibility for family health insurance, may take capital income into account. It is best to check such limits with your Krankenkasse because they change.

Losses: what can be offset

Capital losses remain within the category of capital income. They cannot reduce salary, business income, or rental income. In a normal situation, the bank keeps a Verlustverrechnungstopf and offsets losses against suitable future income.

There is a separate rule for shares: losses from the sale of shares can be offset only against profits from the sale of shares. If the loss arose at one German bank and the profit at another, a Verlustbescheinigung is usually needed for offsetting through the tax return. It must be requested from the bank by mid-December; many banks name December 15 as the deadline.

Fraud warning sign: a “withdrawal tax”

If a broker demands that you first transfer a “withdrawal tax” to a third-party account, in cryptocurrency, or through a dubious payment service, that is a serious red flag. A legitimate German bank or regulated broker does not unlock funds through such payments.

In that situation, do not transfer additional sums, keep the correspondence and bank details, contact your bank, and if necessary file a report with the police.

Frequently asked questions

Do I need to file a tax return if my German broker withheld everything?

Often no. If the tax was withheld correctly and there are no other reasons to file, the Abgeltungssteuer is considered settled. Filing may still be worthwhile if you did not use your Sparer-Pauschbetrag or your personal rate is below 25%.

What should I do with a foreign broker?

Keep the Jahressteuerbescheinigung, reports on trades, dividends, interest, and foreign tax withheld. In Germany, such income usually must be shown in the tax return because a foreign broker does not always withhold German tax.

Can I avoid tax if my income is below 1000 euros?

If your entire capital income for the year does not exceed the Sparer-Pauschbetrag and the allowance was claimed correctly through a Freistellungsauftrag or the tax return, no tax should ultimately arise. If the bank already withheld tax, the overpayment can be recovered through the tax return.