Future Tax Landscape 2025: The Pivotal Tax Changes You Need to Know This Year
New Year, New Tax Rules: A Guide to 2025's Tax Changes
Hello there! With 2025 just around the corner, it's time to wrap your head around the upcoming tax adjustments affecting your income, investments, real estate, and special accounts.
1. Income Tax Reform
Prepare for some changes in your income tax rates as the basic allowance receives another boost. The tax-free subsistence minimum will rise to 12,096 euros (for singles) in 2025, increasing by 252 euros to 12,348 euros in 2026. Plus, the tariff peaks will be pushed back in line with inflation, delaying the appearance of the higher tax rates.
2. Say Goodbye to the Solidarity Surcharge
To ease the burden of the "solidarity surcharge," the tax-free threshold will also be increased in 2025. Employees and self-employed individuals will no longer have to pay the 5.5% surcharge on income tax liability if their assessed income tax is below 19,950 euros (singles) or 39,900 euros (jointly assessed couples).
3. Investors Take Note: Stock Market Losses
Since 2021, investors have only been able to offset losses from derivatives such as CFDs and options up to 20,000 euros per year, and only with similar gains from derivatives. To simplify matters, the Bundesrat has agreed to completely abolish the limited loss offsetting for derivatives and claims on private assets, change that will apply to open cases at the time as well.
4. Funds & ETFs: The Exit Tax
Beginning January 1, 2025, an "exit tax" will be introduced on funds and ETFs, previously only applied to held corporate shares. Investors who emigrate will now be required to pay tax on their capital investments, even if they remain in the portfolio. This change will levy a "fictitious disposal tax" (up to 27.99%) on the accumulated gains since acquisition, regardless of whether the fund shares are actually sold. The taxability of emigrating investors will depend on the sum of their individual investment contributions. If the amount exceeds 500,000 euros, they will have to pay corresponding taxes to the German tax office in the future.
5. Foreign Currency Accounts
Banks, acting as "payment agents of the tax office," must consider realized currency gains and losses on fixed-income investment accounts in foreign currencies within the scope of withholding tax as of January 1, 2025. There will be a transition period until December 31, 2024, during which foreign currency transactions may still be treated as "private disposal transactions" (tax-free gains after one year of holding). Banks have the option to apply the new regulation in 2024 or 2025.
6. Solar Power Systems
The tax exemption for small solar power systems will be unified: A maximum permissible gross output of 30 kW (peak) will apply to all types of buildings in the future.
7. Real Estate Tax Reform
In 2025, a new real estate tax reform will go into effect. Homeowners will have the option to set a lower value for their property if they can provide evidence that this value is at least 40 percent lower than the value set by the tax office.
These changes are a just a few of the key adjustments you can expect in 2025, ensuring you're well-informed for the new fiscal year!
Stay tuned for more updates as the new tax laws unfold. Happy New Year!
1. Adjustments in Personal-Finance Management
Given the forthcoming tax changes in 2025, it would be beneficial to emphasize personal-finance management, especially in relation to income tax rates, the tax-free threshold, and the abolition of limited loss offsetting for derivatives.
2. Finance Implications for Investors
Future investors should also consider factors like the "exit tax" on funds and ETFs, changes to foreign currency accounts, the unified tax exemption for solar power systems, and the real estate tax reform when analyzing their investment decisions for the new fiscal year.
