Tax crypto profits in Germany: How to reduce taxes

Crypto has gained tremendous popularity over the past few years and many investors have entered the market to take advantage of the high returns. But as with any investment, it is also important to keep an eye on the tax aspects with cryptocurrencies.

Taxing crypto profits in Germany: This is how losses can reduce the tax burden

The Federal Fiscal Court recently decided (Az.: IX R 3/22) that crypto profits made through speculative trading with Bitcoin, Ethereum & Co. are generally taxable . This mostly affects speculators who have less than a year between buying and selling crypto. But what happens when some crypto trades are losing while others are making profits?

In this case, crypto gains and crypto losses can be offset against each other to reduce the tax burden. Exactly how this works, however, depends on the type of income and its rules. This emerges from a recently published press release by the Federal Chamber of Tax Advisors in Berlin. For example, only transactions of the same type can be offset against each other. Anyone who has sold their cryptocurrencies at a loss as part of a private sale transaction can only offset these losses against profits that were also made in a private sale transaction. It does not matter whether the profits were made with the same asset or not.

What else to consider?

The exemption limit of EUR 600 per calendar year must also be observed. Profits from private sales transactions that do not exceed this limit also do not have to be taxed. However, only realized losses that occurred within the one-year holding period can be taken into account.

Anyone who allows more than a year to elapse between the purchase and sale of Bitcoin , Ethereum & Co. does not have to pay tax on the crypto profits anyway. In any case, however, it is advisable to consider tax aspects of crypto transactions at an early stage. If necessary, also seek professional support from a tax advisor.

Cryptocurrencies are a relatively new asset class and the tax rules are complex. It is important to understand the implications for your own tax return and to consult a professional if you have any questions. Offsetting crypto gains and losses is a way to reduce the tax burden and should definitely be considered.