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6 Ways to Avoid Crypto Tax in Germany

6 Ways to Avoid Crypto Tax in Germany

Looking for an easy way to avoid crypto taxes in Germany? 

While there’s no legal way to evade your taxes, there are strategies you can use to legally minimize your tax bill. 

In this guide, we’ll cover 6 simple tricks that can help you save money during tax season. 

How is cryptocurrency taxed in Germany? 

Before we jump into our tax strategies, let’s review the basics of how cryptocurrency is taxed in Germany. 

You’ll pay taxes on cryptocurrency when you earn cryptocurrency or dispose of your cryptocurrency after less than a year of holding. 

When do I pay taxes on crypto

For more information, check out our complete guide to how crypto is taxed in Germany

Can I evade crypto taxes in Germany? 

Many cryptocurrency investors assume that because crypto transactions are pseudo-anonymous, there’s no need to report crypto taxes. 

This is false. In recent years, the EU has taken steps to crack down on crypto tax fraud. 

The European Union’s Sixth Anti-Money Laundering Directive came into effect in December 2020 and applies to all crypto exchanges with customers in EU member states. Exchanges operating in Germany are now required to collect customer information and share them with authorities upon request. 

1. Hold cryptocurrency for the long-term 

Pro Tip: Holding cryptocurrency

The easiest way to reduce your crypto tax bill is to simply hold your cryptocurrency for the long-term. 

You won’t pay any taxes on gains when you dispose of your cryptocurrency after a year or more of holding!

2. Take advantage of tax-free thresholds 

Germany has tax-free thresholds for capital gains and income. 

Your first €600 of short-term capital gains and your first €256 of staking and mining rewards are completely tax-free. 

3. Tax-loss harvesting 

Pro Tip: Crypto Losses

Cryptocurrency losses can offset your short-term capital gains! 

You can only write off your capital losses if you held your crypto for less than 12 months. Just as long-term capital gains are not considered taxable, long-term capital losses cannot be used to offset gains. 

If you’re using multiple wallets and exchanges, it can be difficult to tell which one of your positions is currently trading at a loss. CoinLedger can help. Just plug in your wallets and exchanges and the platform will show you your biggest tax-loss harvesting opportunities. 

4. Give a cryptocurrency gift 

In Germany, you can give a cryptocurrency gift to your spouse completely tax-free up to a value of €500,000. The exclusion limit for gifts renews every 10 years. 

If your partner is in a lower tax bracket, gifting cryptocurrency can be a helpful tax strategy. If you have cryptocurrency that you’ve held for less than a year, you can gift your coins to your partner to save money on a potential disposal. 

5. Relocate to a tax-free country 

While it may seem like an extreme step to take, some investors do choose to relocate to countries with friendlier crypto tax policies to reduce their tax bill. 

Some EU countries have lower effective tax rates on cryptocurrency than Germany. For example, Malta does not tax cryptocurrency gains and income for individual investors. 

For more information, check out our guide to crypto tax-free countries

6. Use crypto tax software 

Remember, not reporting your crypto taxes on time can be expensive. 

In Germany, you’ll be fined 0.25% of your unpaid tax liability per month — which can reach as high as €25,000 for high-income investors.

If you’re having trouble calculating your crypto taxes, crypto tax software like CoinLedger can help. Just connect your wallets and exchanges and generate a comprehensive crypto tax report with the click of a button! 

How CoinLedger can help 

More than 400,000 investors around the world use CoinLedger to take the stress out of tax season. Just connect your wallets and exchanges and let the platform generate your tax reports in minutes. 

Get started with a free account today.

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