Following the stock market collapse, investors are now strategically realizing capital losses to minimize their tax burdens.
Heads Up for Investors: Tax-Saving Strategies and Legal Changes
If you're losing money on the stock market, it's essential to be aware of the financial nitty-gritty. Here's a rundown of current tax laws and potential changes that could help you save some dough.
Historical Context
Since the inception of the withholding tax in 2009, banks have maintained separate accounts for stock losses, general losses, and foreign withholding tax. However, stock losses can only be offset against gains from other stock sales at present. Not against gains from funds, bonds, or interest and dividends.
Federal Constitutional Court Proceedings
Investors seeking to offset their current stock losses may find hope in a model case making its way through the Federal Constitutional Court (Az. 2 BvL 3/21). This case could impact the question of whether the existing limitation on offsetting stock losses is constitutional. Note that this information is based on the article and doesn't necessarily reflect the court's official position.
Recent Tax Changes
As of 2021, investors could only offset losses from derivatives like CFDs (Contracts for Difference) and options up to €20,000 per year – only against similar gains from derivatives. But the Bundesrat has agreed to eliminate this limited loss offset for derivatives and claims entirely, starting from November 22, 2024. This change applies to all open cases at that date, excluding already finalized tax assessments.
Cross-Institution Loss Offset
For investors with accounts at multiple institutions or married couples aiming to offset losses across banks, a loss certificate must be submitted by December 15, 2025. This certificate must be requested from custodian institutions.
For more details on the constitutionality of certain funds, check out our article: Is the Tax-Saving Ban on These Funds Unconstitutional?
Keep an eye on developments in the Federal Constitutional Court (Az. 2 BvL 3/21) and the general tax landscape for additional opportunities to minimize your tax burden. Good luck, and happy investing!
- The Federal Constitutional Court case (Az. 2 BvL 3/21) could potentially challenge the constitutionality of the current limitation on offsetting stock losses.
- Currently, stock losses can only be offset against gains from other stock sales, but not gains from funds, bonds, or interest and dividends.
- As of 2024, the Bundesrat has agreed to eliminate the limited loss offset for derivatives like CFDs and options, applying to all open cases at that date, excluding already finalized tax assessments.
- By December 15, 2025, investors with accounts at multiple institutions or married couples aiming to offset losses across banks must submit a loss certificate requested from custodian institutions.
