The €1,000 Tax Secret: Navigating German Crypto & ETF Taxes

If you’ve started "Becoming Your Own Bank," you’ve already made the most important move: you’ve stopped letting your money rot in a 0.1% savings account. But as your investments grow, a new player enters the game: the Tax Man.

In Germany, the tax rules can feel like a labyrinth. If you don't know the map, you might end up paying 25% of your gains to the state unnecessarily. But if you understand a few secrets hidden in the law, you can keep significantly more of your wealth.

Let's break down the rules of the game so you can play it like the rich do.

The €1,000 Threshold (The Freistellungsauftrag)

The first thing every investor in Germany needs to know is the Sparer-Pauschbetrag. As of 2023, the German government allow you to earn up to €1,000 per year in investment income (dividends or capital gains) completely tax-free. If you are married and file together, this amount doubles to €2,000.

This is a "Use it or Lose it" benefit. If you don’t make at least €1,000 in profit this year, you can’t carry the leftover tax-free space into next year.

The Pro Move: You must tell your broker about this by setting up a Freistellungsauftrag. If you use a German neobroker like Trade Republic or Scalable Capital, you can do this in the app settings in about 30 seconds. If you don't do this, the broker is legally forced to take 25% of your profit and send it to the Finanzamt immediately, even if you are below the €1,000 limit.

The Big Difference: Stocks vs. Crypto

This is where many people get confused. The €1,000 limit mentioned above applies to Capital Gains (ETFs, Stocks, and interest). However, Crypto is treated differently in Germany. It’s not seen as a "capital investment" but as a "private sale."

This leads to two very different rules that you must understand to avoid a massive tax bill.

1. The "1-Year Rule" (The Magic of Crypto)

If you buy Bitcoin or Ethereum and hold it for more than one year, your entire profit is 100% tax-free when you sell. It doesn’t matter if you made €100 or €1,000,000. This is one of the most generous crypto tax laws in the world and the reason why I advocate for a "Buy and Hold" strategy.

If you want to dive deeper into how to structure your crypto portfolio to take advantage of this, check out my 2025 Guide to Optimizing Crypto Taxes in Germany.

2. Short-term Gains: The €1000 Trap

If you sell crypto within less than a year, you have a tax-free limit (the Freigrenze).

Crucial Warning: Unlike the €1,000 stock limit, the crypto limit is a "hard cliff."

• With Stocks/ETFs: If you make €1,010 in profit, you only pay tax on the €10 that exceeded the limit.

• With Short-term Crypto: If you make €999, you pay €0. But if you make €1001, you pay tax on the entire €1001.

  
  

The moment you go one euro over, the whole protection vanishes. This is a trap that catches many beginners who trade frequently.

Automation: Let the Neobrokers Do the Heavy Lifting

The best part about being an investor today is that you don't need to be an accountant. If you use a broker based in Germany, they handle the Abgeltungsteuer (Capital Gains Tax) for you automatically.

When you sell an ETF for a profit, the broker automatically checks if you still have space in your €1,000 limit. If you don't, they withhold the tax (roughly 26.38%) and send it to the Finanzamt on your behalf. See this list for the best brokers in the EU.

Wait, what if I don't have €1,000 to invest yet? You can actually start building your "bank" without spending a cent. There are several ways to get started with small amounts of Bitcoin just by using different apps and services. I’ve put together a list of 9 ways to earn free crypto and bitcoin in 2024 to help you get your first "digital bricks" for free.

Summary: Your Tax Checklist

• Set your Freistellungsauftrag: Make sure your broker knows about your €1,000 limit today.

• Hold your Crypto: If you can wait 366 days, you win the tax game.

• Watch the €1000 Cliff: Be very careful with short-term crypto trades so you don't fall off the cliff.

• Stay Automated: Use German-based brokers to avoid the headache of manually calculating every trade.

  
  

Taxes are the single biggest "fee" you will ever pay. By learning these basic rules, you aren't just saving money. You are accelerating your journey to freedom.

Remember that despite the fact that the rich people pay more taxes in general, they know how to play the game of taxes and get even richer with them. Playing the game of investing and taxes go in my opinion very hand in hand.