Saving tax on your portfolio: loss offsetting, exemption order, Günstigerprüfung and tax-loss harvesting

In depth12 min read · 14 sources

If you want to save tax on your portfolio in Germany, you cannot opt out of the flat-rate withholding tax (Abgeltungsteuer), but you can often defer it, offset losses more effectively and make full use of allowances. The most important levers are the loss offset pots, a correctly allocated exemption order (Freistellungsauftrag), the loss certificate (Verlustbescheinigung) by 15 December, the most-favourable assessment (Günstigerprüfung) on a low income, and targeted selling and buying back. Here are the rules as of October 2026, with worked examples. The basics of the flat-rate tax and the partial exemption (Teilfreistellung) are explained in the article flat-rate tax and partial exemption. Not tax advice.

The levers at a glance

Loss offset pots

Your bank keeps two pots for you. The stock loss pot (Aktienverlusttopf) only receives losses from selling individual shares; they may only be offset against gains from share sales (§ 20(6) sentence 4 EStG (2009)). All other losses (from funds and ETFs, bonds, certificates, options) go into the general loss offset pot and reduce all investment income. Whatever is left at the end of the year, the bank carries forward to the next year.

• Derivatives (Termingeschäfte): the Annual Tax Act (Jahressteuergesetz) 2024 abolished the former limit of €20,000 a year on losses from derivatives for all open cases (CMS 2024); it no longer appears in the current § 20(6) EStG (Income Tax Act).
• Stock losses in court: the Federal Fiscal Court (BFH) considers the special rule for stock losses unconstitutional and has referred it to the Federal Constitutional Court (BFH 2021). As far as we know, no decision had been issued by the end of October 2026.
• Loss carryforward: losses do not expire; they move on to the next year. However, they cannot be offset against salary or rental income.

Allocating the exemption order correctly

Up to €1,000 of investment income a year remains tax-free, or €2,000 for jointly assessed married couples (§ 20(9) EStG (2009)). So that the bank does not deduct tax, it needs an exemption order with your tax identification number (EStG §§ 43, 43a, 44a (2009), § 44a). You can split the amount between several banks and change it at any time. The bank applies the partial exemption first: with an equity ETF, it takes €1,428.57 of income to use up €1,000 of allowance.

Loss certificate by 15 December

Each bank only offsets its own pots. If you have losses at bank A and gains at bank B, you apply to bank A for a loss certificate. The application is irrevocable and must be received by 15 December of the current year (§ 43a(3) EStG §§ 43, 43a, 44a (2009)); if it arrives later, the bank can no longer issue a certificate, and the losses cannot be taken into account in that year's tax return (BMF (2025), marginal no. 234). With the certificate, the carryforward at bank A lapses; instead, the losses take effect via Anlage KAP (the investment income annex of the tax return).

Günstigerprüfung and church tax

On application, the tax office includes your investment income in the normal income tax scale if that is cheaper than the 25% flat-rate tax (EStG (2009), § 32d(6)). The application covers all investment income for the year. It pays off when your other income is low, for example in retirement, during parental leave or as a student. The difference from the marginal tax rate is important: what is compared is the additional income tax on the investment income against 25% of it.

For €3,000 of investment income, the Günstigerprüfung under the 2026 scale (EStG § 32a 2009) pays off up to other taxable income of about €19,300. If your income is below the basic tax-free allowance (Grundfreibetrag) of €12,348, the income up to that limit is completely tax-free. The children's portfolio (Kinderdepot) makes use of this.

The bank deducts church tax automatically if the Federal Central Tax Office reports your religious affiliation to it; it reduces the flat-rate tax according to the formula in § 32d EStG (see church tax). If you object to the query with a blocking notice (Sperrvermerk), you have to file a tax return for every year with capital gains tax (EStG (2009), § 51a(2e)). It does not save anything.

Partial exemption and Vorabpauschale on sale

For equity funds, 30% of gains are tax-free, and a loss also only counts at 70% (InvStG (2016), § 20). The tax office deducts the Vorabpauschale (advance lump-sum taxation) you paid tax on in previous years from the gain on sale (InvStG (2016), § 19); nothing is taxed twice, only earlier (see Vorabpauschale). And FIFO applies: within one account, the units bought first count as sold first (§ 20(4) sentence 7 EStG (2009)). If you want to control purchase lots separately, keep a second account.

Account transfers: acquisition data and change of holder

• Same holder: the old bank reports the acquisition data to the new one (EStG §§ 43, 43a, 44a (2009), § 43a(2)). It only passes on losses if you transfer everything and apply for it; you may also send the two pots to different banks (BMF (2025), marginal nos. 235, 236).
• From abroad: acquisition data from an account in the EU or EEA only count with a certificate from the institution. If they are missing, the bank assumes a flat 30% of the sale proceeds as the gain (§ 43a(2)). Any tax overpaid can then only be recovered through the tax return.
• Different holder: a transfer to another person counts as a sale for capital gains tax purposes, unless you report it as gratuitous. The bank then sends the value and acquisition costs to the tax office by 31 May of the following year (EStG §§ 43, 43a, 44a (2009), § 43(1)). So gifts do not go unnoticed (see inheriting and gifting a portfolio).

Tax-loss harvesting: selling and buying back

With tax-loss harvesting, you sell a position with a paper loss and immediately buy it back, or swap it for a similar one. The loss is realised and offset against gains, while the portfolio stays invested in the same way. As early as 2009, the Federal Fiscal Court saw no abuse of legal arrangements when securities were bought back on the same day in the same type and number at a different price (BFH 2009). For the flat-rate tax, it ruled in 2020 that a disposal depends neither on the level of the price nor on the costs, and that selling worthless shares is not an abuse even if the seller acquires shares from the buyer in return (BFH 2020). The Income Tax Act contains no waiting period for buying back.

The counterpart is realising gains up to the allowance: if a year's allowance would otherwise go unused, you sell units with exactly that much gain and buy them back. With an equity ETF, up to €1,428.57 of gain is tax-free; the higher cost basis permanently lowers the tax later on.

For advanced readers: what tax deferral is worth

A deferred tax S works like an interest-free loan from the tax office. If you invest it for n years at a return r, the advantage remaining after tax on the gain from this investment is:

With S = €1,846.25, r = 6% and n = 10, this gives €1,190.53, as in the example. Constantinides (1983) showed that under a capital gains tax it is optimal to realise losses immediately and defer gains. The limits in Germany: FIFO does not let you choose which units you sell, unlike the HIFO method (highest cost first), which Berkin and Ye (2003) examine for US accounts. And the partial exemption cuts losses as well as gains, so an ETF loss of €10,000 only produces €7,000 of loss that can be offset.

The Günstigerprüfung can also be written as a formula: it pays off as long as T(E + K) − T(E) < 25% × K, with other income E, investment income K and scale tax T. Because the marginal tax rate rises with income, it only pays off as long as the rate at E is still below 25%. And the larger K, the sooner the advantage ends: for €3,000 at about €19,300, for very small amounts only at about €20,774, where the 2026 scale reaches a marginal tax rate of 25%.

What the research shows

Private investors often act against their tax interests. Odean (1998) analysed 10,000 accounts at a US discount broker: investors were much keener to sell winners than losers. In taxable accounts, this disposition effect lowers the after-tax return. Tax-motivated loss sales were most pronounced in December. Similarly, Badrinath and Lewellen (1991) found a clear clustering of loss sales towards the end of the year in more than 80,000 share trades by 3,000 private investors.

Berkin and Ye (2003) used simulations to examine how much systematic loss harvesting achieves: most in markets with high single-stock risk and low returns, and with ongoing contributions that keep creating new purchase lots; withdrawals reduce the advantage. Tax-efficiently managed portfolios beat a simple index fund after tax, even after a sale at the end. Barber and Odean (2000), by contrast, show that frequent trading is costly in itself. So tax-loss harvesting should be rare and targeted, not a reason for constant trading.

Limits and common mistakes

• Deadline missed: after 15 December, there is no loss certificate for the current year.
• Stock loss against ETF gain: does not work, because stock losses need stock gains.
• Underestimated costs: the spread and fees for selling and buying back can eat up the interest advantage of a small tax deferral.
• Tax only deferred: tax-loss harvesting lowers the cost basis. Without reinvesting the tax saved, only a small interest effect remains.
• Forgetting the Günstigerprüfung: if you earn little, the 25% flat-rate tax means giving money away. You only get the refund by filing a tax return.
• Account without acquisition data: the bank then withholds tax on 30% of the proceeds.

Tax law changes, and individual circumstances decide. This article is not tax advice.

How Portfolio Lab calculates it

With German taxes switched on, the Backtest models a private account: flat-rate tax with solidarity surcharge and, if you wish, church tax of 8 or 9%, a saver's allowance of 0 to €10,000 a year, partial exemption per security, Vorabpauschale, FIFO per security and two pots (individual shares in the stock loss pot, everything else in the general pot) with loss carryforward. Taxes arise on rebalancing, withdrawals, the Vorabpauschale and, if you wish, on the sale at the end; this shows you what frequent reshuffling costs.

Not modelled are the Günstigerprüfung, exemption orders at several banks, loss certificates and automatic tax-loss harvesting. To check how much tax a longer rebalancing interval saves, compare the same portfolio with different intervals. Details in the tax calculation methodology.

This article explains a method; it is not investment or tax advice. Worked examples are simplified and rounded. All terms in the glossary.