Tax-loss harvesting legally in Germany: realising losses, repurchasing, timing before year-end and the limits on derivative losses

What you will learn

• Why Germany has no wash-sale rule and what the Bundesfinanzhof has said about selling and repurchasing.
• How to calculate the saving of a harvest after fees and the Teilfreistellung, and why it is mostly a deferral.
• Which losses to harvest first and which losses should not be harvested at all.
• Timing rules for December trades and what changed for derivative losses.

Explanation

Tax-loss harvesting means selling a position that stands at a loss to realise that loss for tax purposes, usually buying back the same or a similar position so that market exposure stays unchanged. The loss goes into the relevant pot (lesson 3).

Legal basis. Unlike the United States, Germany has no wash-sale rule that disallows a loss when the same security is repurchased within a waiting period. The general anti-abuse rule § 42 AO (Abgabenordnung, fiscal code) still exists, but the Bundesfinanzhof has ruled that realising a loss is a legitimate use of the investor's freedom: selling shares at a loss is not abusive even if the proceeds barely cover the fees (BFH, 12 June 2018, VIII R 32/16), and selling and buying back the same securities on the same day at different prices is in principle not abusive either (BFH, 29 September 2020, VIII R 9/17). In practice: a real sale over the exchange with real price risk is accepted; artificial constructions without economic effect, such as a crossing with yourself at an identical price, invite scrutiny. Many investors wait one trading day or switch to a comparable ETF from another provider; for large amounts check with a Steuerberater.

What you actually gain. After the repurchase your acquisition cost is the lower price, so the future gain is larger by exactly the harvested loss: the harvest mostly defers tax. The deferral still has value: the saved tax stays invested, rates may change, and you may later sell inside an unused allowance or under the Günstigerprüfung (lesson 6).

Three ordering rules. (1) Never harvest against income already covered by your Freistellungsauftrag: the bank offsets losses before the allowance, so the loss is used up and the allowance wasted. (2) Harvest single-share losses only where share gains exist or are planned, because they are locked in the share pot. (3) Prefer the Depot where the gains were taxed, so the bank refunds immediately.

Teilfreistellung works both ways. For an equity fund 30 percent of a gain is exempt and 30 percent of a loss is not deductible: a €1,000 loss reduces taxable income by €700. Mixed funds (15 percent) and real-estate funds (60 or 80 percent) follow the same logic.

Timing. The trade date counts, not settlement, so a sale on 30 December belongs to the old year. Cross-bank harvests must be done before the 15 December deadline for the Verlustbescheinigung, and spreads are often wider in the last trading days.

Derivative losses. From 2021 losses from Termingeschäfte (options, futures, CFDs) could only be offset against such gains and only up to €20,000 per year. The Jahressteuergesetz 2024 abolished this restriction retroactively for all open cases, so derivative losses now sit in the general pot like fund losses.

Worked example

Hypothetical example: single investor, no church tax, FSA already used by interest. During 2026 she realised taxable ETF gains of €1,500 (after the Teilfreistellung) at her broker and paid €1,500 × 26.375 percent = €395.63 of tax. In December she holds 50 units of a global equity ETF bought at €100 (cost €5,000), now priced at €80 (value €4,000). Unrealised loss: €1,000.

Step 1, deductible loss: €1,000 × 70 percent = €700 (general pot).

Step 2, new taxable income: €1,500 − €700 = €800. New tax: €800 × 26.375 percent = €211.00. The bank refunds €395.63 − €211.00 = €184.63.

Step 3, costs: she sells 50 units and buys a comparable ETF from another provider the next day. Two orders at €1 each plus a spread of, say, 0.10 percent on €4,000 twice = €8; total about €10. Net benefit this year: about €174.63.

Step 4, honesty check: her cost basis is now €4,000 instead of €5,000. If she sells later at €120, the taxable gain is €2,000 × 70 percent = €1,400 instead of €700. The extra €700 is exactly the loss harvested today; the benefit is the time value of €184.63 and the option to sell later inside an unused allowance or at a lower personal rate. Any price move between sale and repurchase is a real gain or loss, not a tax effect.

Common mistake

Practice activity

On paper: an investor has taxable share gains of €2,000 at Bank A this year (tax withheld €527.50) and a single share at Bank B with an unrealised loss of €1,800. He also holds a bond ETF at Bank B with an unrealised loss of €1,200 (no Teilfreistellung for bond funds). Round-trip costs are €10 per position. (a) Which loss can offset the share gains? (b) What refund does he get if he harvests both and files a Verlustbescheinigung from Bank B, and what deadline applies? (c) What would be simpler?

Key takeaways

• Germany has no wash-sale rule; the BFH accepts genuine sales and repurchases, but avoid artificial same-price constructions.
• A harvest lowers your cost basis, so it mainly defers tax; the value lies in time, allowance and rate changes.
• Harvest only against taxable income above the allowance; 30 percent of an equity-fund loss is not deductible.
• Trade date counts; derivative losses are no longer capped at €20,000.

Next step

Lesson 5 walks through the Anlage KAP, KAP-INV and KAP-BET, where cross-bank losses and foreign-broker income end up.