Which income is considered capital income?
With the introduction of the withholding tax, it is generally no longer necessary to submit the KAP form. However, in some cases you must still complete the KAP form:
- capital gains are not subject to tax deduction (e.g. sale of GmbH shares of less than 1 percent)
- income from foreign accumulating investment funds
- income (interest, dividends, etc.) from foreign accounts or deposits
- interest from private loan agreements
- interest on tax refunds
- sale of endowment life insurance policies (for contracts concluded from 2005)
Note: For certain income, you must also complete the KAP-INV form (for income from investment income not subject to domestic tax deduction) or KAP-BET form (for income from capital assets in the case of shareholdings, if the income and the tax to be credited have been determined separately and uniformly).
Furthermore, the KAP form must be completed in the case of an optional assessment if:
- a loss carryforward from previous years is to be taken into account or a loss offset of income from capital assets is to be made, or
- the saver’s allowance has not been fully utilised, or
- church tax has not been deducted despite church tax liability, or
- foreign taxes are still to be taken into account, or
- to check the amount of the capital gains tax deduction.
If you wish to apply for a so-called favourable tax rate check, you must also complete the KAP form. This may allow you to benefit from a lower tax rate with your individual tax rate if it is lower than the withholding tax rate of 25 percent.
Hinweis
There are special regulations for losses from worthless shares in the case of pure account write-offs.
Which income is considered capital income?
Can I deduct income-related expenses for capital gains?
As a rule, no. With the introduction of the withholding tax in 2009, the tax liability on capital gains is settled at a flat rate of 25 percent. Therefore, the deduction of actual income-related expenses is excluded. Instead, a saver's allowance is granted:
- 1.000 Euro for single persons
- 2.000 Euro for jointly assessed spouses
This allowance covers all expenses related to capital gains, such as custody fees or advisory costs.
No income-related expenses even with favourable tax assessment
Even if you apply for a so-called favourable tax assessment – i.e. taxation of your capital gains at the individual tax rate if it is below 25 percent – no actual income-related expenses may be claimed.
This has been confirmed by the Federal Fiscal Court (BFH ruling of 28 January 2015, VIII R 13/13).
Exception: Income-related expenses in mandatory assessment at individual tax rate
In certain cases, the withholding tax does not apply, but a mandatory assessment at the individual tax rate does. Then the general rules of income tax law apply, and income-related expenses may be deducted with proof.
In these cases, the saver's allowance is not granted, but actual expenses – e.g. interest on debt – can be considered (§ 32d paragraph 2 EStG).
Examples of such mandatory assessments:
Current case law: Prohibition of deduction of income-related expenses is constitutional
The Federal Fiscal Court decided in a recent ruling on 08.04.2025 (VIII B 79/24) that the prohibition of deduction of income-related expenses in § 20 paragraph 9 EStG is constitutional – even in the case of high capital gains where income-related expenses significantly exceed the saver’s allowance.
Can I deduct income-related expenses for capital gains?
