Vorabpauschale & German Tax-Free Allowance — Using the 1,000 € Correctly (2026)
The Sparerpauschbetrag is the simplest tax shortcut ETF investors get: 1,000 € capital income per year (single) or 2,000 € (married, joint filing) stays completely tax-free. To activate it, you set up a Freistellungsauftrag at your broker — without it, the broker withholds tax and you have to claim it back through the annual return. Here is the complete 2026 playbook: how to set it up correctly, distribute across multiple brokers, and which allowance levers are commonly missed. Applies to investors with German tax residency.
Single 2026: 1,000 €. Married: 2,000 € (joint filing). The allowance applies after partial exemption — for equity ETFs, on the already 30%-reduced amount.
How the Allowance Eliminates the Vorabpauschale Entirely
Example: Single investor with 50,000 € MSCI World ETF. Vorabpauschale 2026 = 801.50 €. After 30% partial exemption = 561.05 € taxable. With an active Freistellungsauftrag of 1,000 €, those 561 are fully consumed by the allowance — 0 € tax. Without the Freistellungsauftrag: ~148 € tax that you’d have to reclaim via annual return.
For a world equity ETF, the 1,000 € allowance covers approximately 89,000 € of ETF holdings entirely (1,000 / 0.01125, where 0.01125 = 1.603% × 0.7 = effective taxable rate). For married couples: ~178,000 €.
Splitting the Freistellungsauftrag Smartly
You may distribute the 1,000 € allowance across any number of brokers — but the total must not exceed 1,000 € (otherwise mandatory bank reporting and potential penalty). How to split sensibly?
| Setup | Recommended Split | Rationale |
|---|---|---|
| 1 broker (e.g. Trade Republic) | 1,000 € full | Maximum headroom in one place |
| 2 brokers, one main depot | 800 / 200 € | Main depot covers VP, rest for savings interest |
| 3 brokers, evenly | 400 / 300 / 300 € | Each broker has enough for distributions |
| Savings + equity broker | 600 (equities) / 400 (savings) | Interest is taxed fully at the savings bank (no PE) |
Married Couples: Using the 2,000 € Correctly
With joint filing, the allowance doubles to 2,000 €. Often given away because:
- Set up a joint Freistellungsauftrag at every broker — both spouses sign.
- Allocate the allowance per person based on individual depot size (Person A 1,200 €, Person B 800 € if A has more wealth).
- For separate filing: revert to two independent 1,000 € orders.
- Order set up only for one partner — wastes allowance.
- Allowance in a common depot while individual depots run dry.
- Failing to update during separation/divorce — retroactive correction needed.
Step-by-Step: Freistellungsauftrag at the Five Largest Brokers
Setup typically takes 2 – 5 minutes, valid indefinitely (until you change it). Usually applies retroactively to Jan 1 of the current year — but if the broker has already withheld tax, you can only reclaim through your annual return.
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FAQ
What happens if I don’t set up a Freistellungsauftrag?
The broker withholds full capital-gains tax on every cent of capital income — including the Vorabpauschale. You can claim back overpaid tax via the Anlage KAP in your annual return, but expect months of waiting.
Can I increase the allowance retroactively?
Yes, anytime via the broker’s online form. The order applies retroactively to Jan 1 of the current year — already-withheld tax is usually refunded by the broker within a few days.
What if my total orders exceed 1,000 €?
Banks are legally required to report exceeded allowances. The tax office automatically receives this information — expect repayment plus late-filing surcharge. Annually verify: sum of all orders ≤ 1,000 € (single) or 2,000 € (married).
What counts as capital income?
Distributions, Vorabpauschalen, realized gains (with partial exemption), savings and time-deposit interest, crowdinvest interest. Direct crypto holdings (held > 1 year, tax-free) do not count — but crypto ETPs do.
Are losses also offset against the allowance?
No — losses go into the loss-offset bucket and are netted against gains, not the allowance. The allowance lapses unused each year if you have no positive capital income.
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