Once considered a curiosity in the form of a digital payment method, cryptocurrencies today constitute an extremely popular investment opportunity. They elicit numerous controversial reactions and are subject to highly dynamic developments, which results in the continuous application of new regulations. Profits can certainly be generated, which—as with any type of income—entails the obligation to remit a portion to the tax authorities. How are profits from cryptocurrencies taxed? Who is liable to pay? How are cryptocurrencies disclosed in the tax return? This article provides answers to these questions.
Are cryptocurrencies subject to taxation?
Cryptocurrencies do not have a physical form, but they possess a certain value and can therefore be considered virtual or digital money, existing exclusively in digital format. At present, cryptocurrencies are seldom used as a means of payment. More frequently, they serve as financial instruments requiring valuation —on the one hand, they are characterized by high investment risk, on the other hand, they offer the potential for substantial profits.
Irrespective of whether profits or losses have been realized in cryptocurrency trading, correct reporting in the tax return must be ensured. To that end, the tax treatment of cryptocurrencies must first be clarified.
First, it must be established what is not subject to tax. The acquisition of cryptocurrencies in exchange for conventional currencies is not taxable. Likewise, transfers between one’s own wallets or to another exchange are tax-exempt.
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When is tax due on cryptocurrencies?
Individuals who invest in cryptocurrencies and other assets and generate profits therefrom are subject to taxation in Germany. The basic requirement is residence in Germany—that is, a stay of more than 183 days per year.
From a tax law perspective, profits and losses from the sale of cryptocurrencies are classified as private disposal transactions. Calculation is based on the difference between acquisition and sale price. These profits are taxed according to the individual income tax rate (plus, where applicable, solidarity surcharge and church tax).
In the tax return, cryptocurrencies are to be declared under § 23 para. 1 sentence 1 no. 2 German Income Tax Act (EStG) in the section “private disposal transactions”. Profits from trading in digital assets are thus regarded as “other assets.”
It is important to note that for the tax authorities it is irrelevant whether the profit remains in cryptocurrencies, is converted into other cryptocurrencies or into fiat currencies —what matters is its value.
For cryptocurrencies, it is advisable to maintain a detailed record of all transactions from the very first trade, not merely at the time of preparing the tax return. Not only sales for euros are relevant, but also crypto-to-crypto exchanges, payments using digital currency, or exceeding the exemption threshold. As a practical recommendation: transaction dates, purchase and sale values, and origin of funds should be documented, since as of 2026, more rigorous scrutiny may mean that lack of supporting documentation has more serious consequences than the actual tax liability.
What is the tax rate for cryptocurrencies?
The regular income tax rate applies to the sale of cryptocurrencies, ranging from 14% to 45%.
Cryptocurrency tax – What is the tax exemption threshold?
In Germany, an exemption limit of €1,000 applies to income from private disposal transactions —amounts not exceeding this threshold remain tax-free. If the total realized capital gains in a given year exceed this limit, the entire amount is subject to taxation.
For example: if the annual profit from cryptocurrencies amounts to €590, no tax is due; if it is €1,002, the entire amount is taxed, not merely the portion exceeding the exemption limit.
It should be noted that the exemption threshold of €1,000 is not limited to cryptocurrencies, but applies to all private disposal transactions within a calendar year. In each profitable disposal—for example, of electronic devices—if the limit is exceeded, the gain from cryptocurrency trading will also become taxable.
For illustration: In 2026, the profit from cryptocurrency trading amounts to €200, and additionally, antique furniture is sold, yielding proceeds of €500. The sum thus exceeds the specified exemption threshold, so the full amount of €700 becomes subject to taxation.
Taxation of cryptocurrencies – One-year speculation period
Cryptocurrencies held for more than 365 days can be sold tax-free—regardless of the amount of profit generated. However, this period must be calculated separately for each acquisition, requiring precise documentation of acquisition dates and values in cases of multiple purchases. If the sale occurs before the end of the year, the profit may be classified as a private disposal transaction and become taxable if the statutory exemption threshold is exceeded.
Payment with cryptocurrencies and tax
Payments with cryptocurrencies are considered private disposal transactions in Germany and may be subject to income tax if certain conditions are met. Every transaction in which a virtual currency is used for settlement is thereby subject to the same rules as a purchase paid in cash or via bank transfer.
Gifts in the form of cryptocurrencies
Gifts of cryptocurrencies may be subject to gift tax in Germany under the same principles as other transfers of assets. The decisive factors for taxation are, in particular, the value of the transferred cryptocurrencies and the degree of kinship between donor and recipient. The exemption limits are not annual amounts—they generally apply for a period of 10 years and amount, for example, to €500,000 for spouses or registered civil partners, €400,000 for children, €200,000 for grandchildren, and €20,000 for more distant relatives or non-relatives. Only when these exemption limits are exceeded does a tax liability arise.
DAC8 and cryptocurrencies in Germany – new obligations and intensified controls from 2026
From 1 January 2026, Germany will implement the EU Directive DAC8 (Crypto Tax Transparency Act – KStTG), which provides for the automatic reporting of cryptocurrency transactions to the Federal Central Tax Office (BZSt). The regulations affect providers of crypto services (exchanges, trading platforms, custody platforms), which are required to register, conduct user due diligence, and submit detailed transaction data.Among other things, purchases and sales of cryptocurrency for fiat currencies, crypto-to-crypto exchanges, transfers, staking, or custody of assets are subject to reporting—including Bitcoin, altcoins, stablecoins, and NFTs.
The first reporting period covers the year 2026, and the data must be submitted to the BZSt by 31 July 2027 and subsequently exchanged between EU Member States. Although taxpayers do not have to submit additional declarations (the platforms report on their behalf), the level of oversight and the risk of sanctions increase significantly —under § 18 KStTG, violations of reporting, registration, or audit requirements may result in administrative fines of up to €50,000 and, for certain further infringements, up to €10,000 . In practice, this means that comprehensive documentation of all transactions—including those via DEXes and foreign exchanges—and independent verification of statements are necessary in order to avoid adjustments and fiscal problems.
What are the consequences of tax evasion involving cryptocurrencies?
Tax evasion is unlawful and is subject to severe penalties. Depending on the amount involved, this can result in a fine or a custodial sentence of up to ten years. If irregularities are identified, the taxpayer is required to pay the outstanding tax including interest and late payment penalties.
In order to avoid complications and to ensure the correct taxation of cryptocurrency profits, the use of accounting software such as Taxando is recommended—this proven tool is highly user-friendly and enables the recording of all income. Tax returns can thus be prepared fully digitally and without the need to visit a tax office.
FAQ
Must cryptocurrencies be declared in the tax return in Germany?
Yes, provided that a taxable gain has been realized through the sale, exchange, or use of cryptocurrencies as payment. Mere acquisition of cryptocurrencies and transfers between one’s own wallets do not have to be declared.
When is tax on cryptocurrencies payable in Germany?
Tax liability may arise if cryptocurrencies are sold or exchanged at a profit before one year has elapsed since acquisition. The gain is then considered a private disposition transaction and is taxed at the individual income tax rate.
Is the sale of cryptocurrencies tax-free after one year?
Yes, if the cryptocurrency has been held for more than 365 days, the sale is generally tax-free in Germany. The holding period must be calculated separately for each individual acquisition.
What is the tax exemption threshold for cryptocurrencies in Germany?
The exemption threshold for private disposition transactions is €1,000 per year. If this threshold is exceeded, the entire gain is subject to taxation, not only the amount exceeding the exemption.
Is the exchange of one cryptocurrency for another taxable?
Yes, the exchange from crypto to crypto can be treated as the sale of one and the purchase of another cryptocurrency. If a gain arises within one year of acquisition, it may be subject to tax.
Must payment with cryptocurrency for goods or services be taxed?
Yes, payment with cryptocurrency can be treated as the disposal of that cryptocurrency. If the value on the date of payment exceeds the acquisition cost and less than one year has elapsed since acquisition, tax liability may arise.
Can losses from cryptocurrencies be taken into account for tax purposes in Germany?
Yes, losses from private disposition transactions can be taken into account, but only within the same type of tax. This means that losses from cryptocurrencies can be offset against gains from other private disposition transactions, but not against, for example, income from non-self-employed work.
Which documents should be retained for the accounting of cryptocurrencies?
It is advisable to retain the transaction history from exchanges, purchase and sale confirmations, transaction data, prices, fees, and wallet addresses. Without such documentation, it is difficult to demonstrate to the tax authorities when cryptocurrencies were acquired and what the actual gain was.
What changes does DAC8 bring for persons investing in cryptocurrencies in Germany?
DAC8 increases the transparency of transactions, as crypto service providers will report data to the tax authorities. For taxpayers, this means greater importance of accurate documentation and correct declaration of gains in the tax return.
Maciej Szewczyk
He gained experience as a consultant on IT projects for many international companies. In 2017, he founded the startup taxando GmbH, where he developed the innovative tax app Taxando, which simplifies the filing of annual tax returns.
Maciej Szewczyk combines technological expertise with in-depth knowledge of tax regulations, making him an expert in his field. In his private life, he is a happy husband and father and lives with his family in Berlin.
