Once a novelty as a digital means of payment, cryptocurrencies are now a highly popular form of investment. They elicit strong emotions and develop rapidly, necessitating constant adjustment of new regulations. Certainly, profits can be made, and as with any income, there arises the necessity to remit a portion to the tax office. How are profits from cryptocurrencies taxed? Who is liable for payment? How do you enter cryptocurrencies in the tax return? Answers to these questions can be found in today’s article.
Are cryptocurrencies taxed?
Cryptocurrencies have no physical form, but possess a certain value, so they can be referred to as virtual or digital currencies – they exist exclusively digitally. Today, few cryptocurrencies are used as a means of payment. More often, they serve as financial instruments for valuation – on one hand with high investment risk, on the other hand with the potential to achieve substantial profits.
Regardless of whether profits or losses are made when trading cryptocurrencies, it must be ensured that everything is entered correctly in the tax return. To do this, one should know how cryptocurrencies are classified exactly.
Let’s start with what is not taxed. Purchasing crypto with conventional currency does not incur taxes. Likewise, it is tax-free if you transfer it from one wallet to another or to a new exchange.
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When do taxes have to be paid on cryptocurrencies?
If you invest as a private individual in cryptocurrencies and assets and generate profits from them, you are tax-responsible in Germany. The basic requirement is residence in this country – spending more than 180 days a year there.
From a tax perspective, profits and losses from the sale of cryptocurrencies are private sales transactions. They are calculated based on the difference between purchase and sale prices. These profits are therefore taxed according to the income tax rate for natural persons (plus possible solidarity surcharge + church tax).
Cryptocurrencies in the tax return according to § 23 Abs. 1 Satz 1 Nr. 2 EStG must be entered in the category “Private sales transactions.” Profits from trading digital means are thus considered “other economic goods.”
It is important to know that, for the tax office, it makes no difference whether the profit remains in cryptocurrencies, is exchanged into other crypto, or into traditional currency – its value is decisive.
How high is the tax on cryptocurrencies?
For the tax on the sale of cryptocurrencies (cryptocurrency sale tax), the normal income tax rate for natural persons applies, i.e., from 14% to 45%.
Tax on cryptocurrencies – what is the tax exemption?
In Germany, a tax exemption of €600 applies for income from private sales transactions – amounts that do not exceed this threshold remain tax-free. If the sum of all capital gains in a year is higher, the entire amount is taxed.
For example, if the profits from cryptocurrencies amount to €590 per year, no taxes are due, but at €602, the entire amount is taxed, not just the amount exceeding the exemption.
It must be borne in mind that the €600 exemption does not only apply to cryptocurrencies but to all private sales transactions within a year. So if anything is sold at a profit – e.g., electronic devices – and the limit is exceeded, the profit from trading cryptocurrencies is also taxed.
To illustrate: In 2025, the profit from trading cryptocurrencies was €200, but antique furniture was also sold, which brought an income of €500. The sum therefore exceeds the established exemption, hence the entire amount of €700 is taxed.
Taxes on cryptocurrencies – speculation period of one year
The holding period for cryptocurrencies in Germany is one year. If you own them for more than 365 days and they have not generated a capital gain, the private sale is always tax-free afterwards, regardless of whether a profit was made or not.
Payment with cryptocurrencies and taxes
Payments with cryptocurrency in Germany have been defined as VAT-taxable transactions. Every transaction in which virtual currency is used for payment is subject to the same rules as a cash or transfer purchase.
When converting to euros and vice versa, no additional tax is incurred.
Donations in the form of cryptocurrencies
In Germany, up to €20,000 can be donated tax-free per year – for spouses, the limit is even €500,000. Like other transactions, donations in the form of cryptocurrencies are tax-free as long as they do not exceed this amount.
What is the penalty for tax evasion on cryptocurrencies?
Nobody likes paying taxes and many want to avoid it as much as possible, but there are situations where there is no choice. Tax evasion is illegal and can lead to harsh penalties. Depending on the amount, this can result in a fine or imprisonment of up to ten years. If the tax office finds out (and it’s usually only a matter of time), the due tax must be paid together with interest and late penalties.
To avoid complications and correctly tax cryptocurrency profits, the Taxando tax app can be used – this proven tool is easy to use and takes into account all income. The tax return can be submitted with this app without leaving the house – a warm invitation!
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.
