German Capital Gains Tax 2026: Abgeltungssteuer, Soli and Church Tax Explained
German investors pay a flat-rate withholding tax (Abgeltungssteuer) of 25% on interest, dividends and capital gains. On top comes the solidarity surcharge (Soli) at 5.5% and — for church members — church tax of 8 or 9%. Here's how to calculate each component, how the savings allowance reduces your bill, and when the favorable examination (Günstigerprüfung) saves you money.
Calculate your capital gains tax now →What is Kapitalertragsteuer?
Kapitalertragsteuer (KapESt) is a withholding tax on investment income. Your German bank deducts it at source and remits it directly to the tax office — you don't need to do anything, provided you have set up a tax-free allowance order (Freistellungsauftrag).
Taxable investment income includes:
- Interest (savings accounts, bonds, time deposits)
- Dividends (shares, ETFs, funds)
- Capital gains (share and ETF sales)
- Fund distributions and income
The total tax consists of three parts: Abgeltungssteuer, Soli and (optionally) church tax.
Savings Allowance (Sparerpauschbetrag)
The Sparerpauschbetrag shelters a portion of investment income from tax:
- €1,000 per year for single filers
- €2,000 per year for married couples filing jointly
Submit a Freistellungsauftrag to your bank so it applies the allowance automatically. Without one, the bank withholds the full tax — you can reclaim it via your annual tax return. You can split the allowance across multiple banks as long as the total does not exceed €1,000 (or €2,000).
Abgeltungssteuer: 25%
The taxable portion of your investment income is subject to a flat 25% Abgeltungssteuer. The name means the tax settles (abgilt) the income tax liability on capital gains definitively — regardless of your personal income tax rate.
Formula without church tax:
Formula with church tax (§32d(1) EStG): Because church tax is deductible as a special expense, the Abgeltungssteuer rate is slightly reduced:
For 9% church tax: 25% ÷ 1.0225 ≈ 24.45%
For 8% church tax: 25% ÷ 1.02 ≈ 24.51%
Solidarity Surcharge (Soli): 5.5%
The Solidaritätszuschlag (Soli) of 5.5% is levied on top of the Abgeltungssteuer. Since 2021 the Soli has been abolished for most wage earners — but this exemption does not apply to capital gains. Investment income continues to attract Soli in full.
Church Tax: 8 or 9%
Church members pay additional church tax on their Kapitalertragsteuer. The rate depends on the German state (Bundesland):
| State | Church Tax Rate |
|---|---|
| Bavaria (Bayern), Baden-Württemberg | 8% |
| All other states | 9% |
Banks retrieve your church membership status automatically from the Federal Central Tax Office (Bundeszentralamt für Steuern) via the church tax deduction feature (KiStAM) and withhold church tax without any action required from you. You can opt out (Sperrvermerk) but must then declare church tax yourself in your return.
Step-by-Step Calculation
- Taxable income = Capital income − Savings allowance (min. 0)
- Abgeltungssteuer = Taxable income × 25% (slightly reduced if church tax applies)
- Soli = Abgeltungssteuer × 5.5%
- Church tax = Abgeltungssteuer × church tax rate (church members only)
- Total tax = Abgeltungssteuer + Soli + Church tax
- Net investment income = Capital income − Total tax
Use our free calculator for all scenarios — with or without church tax, with the savings allowance and favorable examination.
Favorable Examination (Günstigerprüfung)
The Günstigerprüfung (§32d(6) EStG) lets you apply your personal income tax rate to investment income instead of the 25% flat rate — if that produces a lower tax bill.
When does it pay off? When your personal marginal income tax rate is below 25%. This typically applies to:
- Pensioners, students or part-time workers with low total income
- Anyone whose income falls below roughly €17,000 per year (single filers)
You must request the Günstigerprüfung in your annual tax return (Anlage KAP). The tax office will then assess both options and apply whichever is lower.
Worked Examples
Example 1: Single filer, no church tax
- Investment income: €3,000
- Savings allowance: €1,000
- Taxable income: €2,000
- Abgeltungssteuer: €2,000 × 25% = €500.00
- Soli: €500 × 5.5% = €27.50
- Total tax: €527.50
- Net investment income: €2,472.50
Example 2: Married couple, church tax 9%
- Investment income: €5,000
- Savings allowance: €2,000
- Taxable income: €3,000
- Effective Abgeltungssteuer rate: 25% ÷ 1.0225 ≈ 24.45%
- Abgeltungssteuer: €3,000 × 24.45% ≈ €733.50
- Soli: €733.50 × 5.5% ≈ €40.34
- Church tax: €733.50 × 9% ≈ €66.02
- Total tax: €839.86
- Net investment income: €4,160.14
Example 3: Favorable examination (marginal rate 15%)
- Investment income: €3,000, savings allowance: €1,000
- Taxable income: €2,000
- Tax at flat rate (25% + Soli): €527.50
- Tax at personal rate (15% + Soli): €2,000 × 15% × 1.055 ≈ €316.50
- Savings from favorable examination: €211.00
Calculate your personal tax burden with our free calculator.
Conclusion
German capital gains tax has three components: Abgeltungssteuer (25%), Soli (5.5%) and optional church tax (8 or 9%). The savings allowance of €1,000 (or €2,000 for couples) shelters part of your investment income from tax.
Investors with low total income should request the favorable examination (Günstigerprüfung) in their annual tax return — it can save hundreds of euros.
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