Crypto Taxes: Holding Period, Exemption Threshold, and Swaps Explained

When are gains from cryptocurrency subject to tax?

If no more than one year elapses between the acquisition and the sale. In 2023, the Federal Fiscal Court ruled that cryptocurrencies such as Bitcoin and Ether constitute “other economic assets” within the meaning of Section 23(1), first sentence, No. 2 of the German Income Tax Act (EStG) (judgment of February 14, 2023, IX R 3/22). The gain from a sale or exchange within the one-year period therefore falls under Section 23 of the German Income Tax Act (EStG).

The gain is calculated as the sales price minus the acquisition costs and income-related expenses, such as trading fees (Section 23(3), first sentence, of the Income Tax Act (EStG)). Anyone who merely holds crypto assets does not engage in a sale transaction and does not realize a gain under Section 23.

How does the one-year deadline work?

The period begins on the day after the purchase and ends at the close of business on the date corresponding to the purchase date in the following year (Section 187(1), Section 188(2) of the German Civil Code (BGB)). A purchase made on March 15, 2026, covers the period up to and including March 15, 2027: A sale made by that date is still valid. As of March 16, 2027, it falls outside the time limit.

If you purchased units at different times, you must assign specific purchases to a sale. The basic principle is to consider each unit individually: what matters is which specific units you sold. If this is not possible, the tax authorities will separate the holding period from the value (BMF letter dated March 6, 2025). The table shows the order.

Calculations are made on a per-wallet basis. Within a wallet, you continue to use the selected method until all units of a given security in that wallet have been sold. You can switch methods only after a complete sale and a new purchase. You have a separate right to choose for each security in a wallet.

Does the €1,000 exemption apply to cryptocurrency?

Yes. If the total gain from all private sales transactions in a calendar year is less than €1,000, it remains tax-free. If the profit is €1,000 or more, the entire profit is taxable, not just the portion above that threshold (Section 23(3), Sentence 5 of the German Income Tax Act (EStG)). The threshold applies to the total of all sales transactions for the year, not per coin and not per exchange.

Is exchanging Bitcoin for Ethereum subject to tax?

Yes, if it takes place within the one-year period. The Federal Fiscal Court treats the exchange of cryptocurrencies as a sale: acquisition and disposal or exchange within one year fall under Section 23 of the Income Tax Act (EStG) (ruling of February 14, 2023, IX R 3/22). The Bitcoin transferred is therefore considered to have been sold.

You should report the market value of the cryptocurrency received at the time of the exchange as the proceeds from the sale of the cryptocurrency transferred. If this cannot be determined, the market value of the cryptocurrency transferred will not be challenged (BMF letter dated March 6, 2025). The market price of the cryptocurrency transferred, plus any incidental acquisition costs paid, also constitutes the acquisition cost of the units received. Transaction fees for the exchange are considered income-related expenses.

This means that the newly acquired units are considered purchased, and a new, separate one-year period begins for them. An exchange therefore resets the counter to zero for the newly acquired items.

A third scenario: If you pay for goods or services with cryptocurrency, you are also considered to be selling it. The proceeds are deemed to be the amount agreed upon in euros; if no amount is specified, they are deemed to be the market value of the cryptocurrency provided.

How are staking and lending taxed?

Ongoing income from staking or lending does not constitute capital gains. Income from lending is classified as income from other services under Section 22(3) of the German Income Tax Act (EStG); income from passive staking is generally classified as such as well (Federal Ministry of Finance letter dated March 6, 2025). An exemption threshold applies here: If the income amounts to less than €256 in a calendar year, it is not subject to income tax. Amounts of €256 or more are fully taxable.

The units received are acquired at the market price at the time of receipt. Their subsequent sale is subject to the normal rules, including a one-year holding period. For simplicity, you may consider the time of entry into your wallet as the relevant date. Rewards that you have not yet claimed are counted no later than the end of the calendar year.

A separate loss reserve applies to other benefits. If income-related expenses exceed income, the excess cannot be offset against other income; however, it reduces income from benefits in the previous year or in subsequent years. These amounts never offset losses from sales.

Mining, airdrops, hard forks, and cryptocurrency assets held as business assets are subject to their own rules, which are not covered in this article.

What are the effects of losses?

Losses from private sales transactions may only be used to offset gains from private sales transactions in the same calendar year. They may not be offset against other income, such as income from employment (Section 23(3), sentence 7, EStG). Any amount not offset in the year it arises reduces, pursuant to § 10d EStG, the gains from private sales transactions in the immediately preceding year or in subsequent years (§ 23 (3), sentence 8, EStG).

What information is needed for the calculation?

For every sale or exchange, the invoice must include the same key information in accordance with Section 23(3) of the Income Tax Act (EStG). The profit can only be determined once the date of purchase, acquisition cost, and proceeds are established. The BMF letter dated March 6, 2025, explicitly lists what you must record for crypto assets held as part of your personal assets.

Anyone with surplus income exceeding €500,000 in a calendar year—and, starting January 1, 2027, exceeding €750,000—must retain the records and documentation related to this income for six years. This may also be done on digital media; during an on-site audit, access to the data in the software used may be required.