Not every investment works out. The good news: losses reduce the tax on your other capital income. However, fixed rules apply, and not every loss may be offset against every gain. This post explains the German loss pots and the changes made by the Annual Tax Act 2024.
The basic rule
Losses from capital assets may not be offset against other income such as wages or rent (§ 20 (6) EStG). They only reduce capital income. Within capital income, your bank distinguishes two pots.
Pot 1: the share loss pot
Losses from selling individual shares may only be offset against gains from selling shares. Offsetting against dividends, interest or fund income is not allowed. This applies only to actual shares, not to equity funds, equity ETFs or certificates on shares.
Example
An investor sells shares with a gain of €4,000 and other shares with a loss of €6,000. She also receives €2,000 in dividends. The share gains are fully offset against the losses, leaving a €2,000 loss in the share pot. The dividends remain fully taxable: after the €1,000 allowance she pays €263.75 in tax. The remaining share loss is carried forward to next year.
Pot 2: the general loss pot
All other losses go into the general pot, for example from bonds, funds and ETFs, certificates, options and other derivatives, as well as accrued interest paid when buying bonds. These losses are offset against all positive capital income, including dividends, interest and share gains.
With the same figures as above but a €6,000 loss from an ETF instead of shares, the picture changes completely: the loss is offset against share gains and dividends and no tax is due at all. Note, however, that losses from equity funds only count at 70 % because partial exemption also applies to losses.
What changed in 2024?
Since 2020, losses from derivatives (such as options and futures) and from bad debts could only be offset up to €20,000 per year. This restriction was highly controversial. With the Annual Tax Act 2024, the legislator abolished it. Under § 52 (28) EStG, the old rule no longer applies to any open case. Losses from derivatives and bad debts are now offset without limit in the general pot.
What happens to remaining losses?
If a loss cannot be offset in the current year, the bank automatically carries it forward to the following year. The drawback: the losses stay at that one bank. If you want to offset them against gains at another bank, proceed as follows:
1. Request a loss certificate (Verlustbescheinigung) from the bank with the losses by 15 December.
2. The bank then closes its loss pots and issues the certificate.
3. Declare the losses in Annex KAP. The tax office offsets them against the gains at the other bank and refunds the overpaid tax.
4. Unused losses are formally recorded by the tax office and taken into account in later years.
Joint offsetting for married couples
For jointly assessed married couples, banks automatically offset one partner's losses against the other's gains at year end if both accounts are at the same bank and a joint exemption order exists. With different banks, again only the loss certificate helps.
Timing can pay off
If you still have gains and losses in your portfolio at year end, targeted sales can steer your tax. But mind the pots: a share loss only helps if there are share gains. And never sell for tax reasons alone. The performance of the investment matters more than the tax saving.
Check with the calculator
In the capital gains tax calculator you enter share gains, share losses and other losses separately. The calculator offsets the pots according to the statutory rules and shows the loss carried forward to next year. The basics are covered in the main guide to capital gains tax. The figures are non-binding and not tax advice.