If you’re a cryptocurrency investor or trader in Germany, you’ve likely wondered how to optimize your taxes. While you can’t wholly avoid crypto taxes, German tax laws offer several opportunities to reduce your tax burden legally. But first, should I pay crypto taxes? Oh myyyyy!
Do I have to pay cryptocurrency taxes in Germany?
Yes. German tax laws categorize cryptocurrency gains as private sales transactions under § 23 of the Einkommensteuergesetz (EStG). Here’s what that means:
Short-term gains: If you sell, swap, or spend crypto within one year of buying it, your gains are subject to Income Tax. Rates range between 0% and 45%, depending on your tax bracket, plus a 5.5% solidarity surcharge.
Long-term gains: If you hold cryptocurrency for more than one year, your profits are tax-free.
Example: If you bought Bitcoin for €5,000 and sold it after 13 months for €15,000, you won’t pay tax on the €10,000 gain.
Can the BZSt track your crypto transactions?
Yes. The Bundeszentralamt für Steuern (BZSt) has the tools and authority to track cryptocurrency transactions.
6AMLD (2021): EU regulations require crypto exchanges to report data to tax authorities.
DAC8 Directive (2025): This upcoming regulation will further empower tax authorities to monitor and verify crypto ownership across the EU.
🫣 If you use major European or global exchanges (e.g., Kraken, Binance), your transaction history is likely shared with the authorities.
Top strategies to reduce your crypto tax legally
Hold crypto for over one year (HODL)
The easiest way to avoid crypto taxes in Germany is to hold your assets for at least one year. After this period, any profit from selling, swapping, or spending your crypto becomes tax-free.
Example:
Bought Ethereum (ETH) in January 2023 for €2,000.
Sold it in March 2024 for €5,000.
Result: €3,000 profit is completely tax-free.
💡 Why it works: Germany encourages long-term investments, offering a clear incentive for HODLers.
Utilize Tax-Free Exemption Limits
Germany provides two key exemptions for crypto investors:
| Threshold | Amount | Details |
|---|---|---|
| Short-Term Gains | Up to €1,000 | Tax-free if total short-term gains ≤ €1,000 (if exceeded, fully taxable) |
| Staking/Mining Income | Up to €256 | Tax-free if total ≤ €256; if exceeded, full amount taxable |
| Joint Filing Threshold | Doubled | €1,000 becomes €2,000; €256 becomes €512 |
| Gift to Spouse | Up to €500,000 | Every 10 years; helps if spouse is in a lower tax bracket |
Key Notes:
If you exceed these limits, the entire amount becomes taxable.
For joint filers, these limits double to €2,000 (capital gains) and €512 (additional income).
💡 Tip: Keep accurate records of all transactions to monitor your tax-exempt thresholds.
Harvest and offset crypto losses
If you’ve made losses on your crypto investments, you can use them to offset taxable gains:
Harvest Losses: Sell underperforming crypto to “realize” the loss.
Offset Gains: Apply these losses against your short-term profits to reduce your overall tax liability.
⚠️ Important: Losses must be realized within the same tax year (by December 31).
Example:
€3,000 loss from Bitcoin.
€5,000 short-term gain from Ethereum.
Total taxable gain = €2,000 (€5,000 - €3,000).
Deduct crypto-related expenses
Certain expenses related to cryptocurrency transactions can be deducted from your taxable income:
Gas fees for transfers
Costs for crypto tax software or accountants
Electricity costs for mining
💡 Tip: Save all receipts and documents related to deductions to ensure compliance. For a full list of deductible expenses, check the following link.
Gift crypto to your spouse
Gifting cryptocurrency to a spouse in a lower tax bracket is a smart way to reduce your family’s overall tax burden.
You can gift up to €500,000 tax-free every 10 years.
Your spouse can then sell the crypto at their lower tax rate.
Example:
You’re in the 45% tax bracket, and your spouse is in the 20% tax bracket.
Gifting crypto before selling it can significantly reduce the tax liability.
Optimize DeFi investments
DeFi taxation is complex, but you can reduce your taxes by:
Using crypto held for more than one year in liquidity pools or staking, as these transactions remain tax-free.
Holding liquidity pool tokens for one year before withdrawing liquidity to avoid tax on gains.
How to report crypto gains and losses
To file your crypto taxes:
Short-term gains: Report on the Anlage SO section of your ESt 1 A form under: “Einheiten virtueller Währungen und/oder sonstige Token.”
Income from staking, mining, or lending: Enter under: “Angaben zu Tätigkeiten im Zusammenhang mit virtuellen Währungen.”
Simplify your tax filing with Norman
Easily calculate and file your crypto taxes with Norman. Generate your personal tax report and submit it directly to the Finanzamt. Norman complies with German tax laws and helps you uncover ways to lower your taxes and save money.
Automatically calculate potential gains and losses.
Apply tax-loss harvesting strategies.
Generate a comprehensive crypto tax report aligned with German tax regulations.
Directly submit your crypto tax data to the Finanzamt with minimal hassle.
Frequently Asked Questions (FAQ)
Is Cryptocurrency Legal in Germany?
Yes. While crypto is not legal tender, it is recognized as a “unit of account” under German law, making trading, buying, and selling legal.
Do I Have to Pay Tax on Staking Rewards?
Yes. Staking rewards are considered additional income and are tax-free only up to €256 annually. Earnings beyond this are taxed at your regular rate.
How Can I Avoid Short-Term Capital Gains Tax?
Hold your crypto for more than one year to benefit from Germany’s tax-free exemption for long-term gains.
How Can I Offset Crypto Gains?
You can offset taxable gains by harvesting losses from underperforming cryptocurrencies and reporting them within the same tax year.
Does Binance Report My Crypto Activity to German Tax Authorities?
Yes. Binance complies with EU regulations and shares transaction data with authorities like the BZSt.
Conclusion
Reducing your crypto taxes in Germany is achievable with careful planning. Whether it’s holding assets for over a year, taking advantage of tax-free exemptions, or harvesting losses, these strategies will help you minimize your tax liability legally. Use tools like Norman to simplify crypto tax reporting and ensure full compliance with German tax laws.
✅ Norman simplifies crypto tax reporting and ensure full compliance with German tax laws.