Taxation of Stock gains

[Smaug 5,849]

10 minutes ago, mikiKam said:

 

what is the tax for capital income is I am unemployed and do not have any other income other than my capital income, which is 2-3 thousands Euro pro year?

 

 

If your income is less than 9,000 euros a year (Grundfreibetrag) your personal tax rate is 0%.

 

Quote

The capital income will then be taxed with 26.375% (= 25% + 5.5%*25% Soli), or with your personal tax rate if that is lower than 26.375%.

 

 

[mikiKam 5]

2 hours ago, Smaug said:

 

If your income is less than 9,000 euros a year (Grundfreibetrag) your personal tax rate is 0%.

 

 

 

Thanks. I wanted to be sure. Then, (also sorry for the maybe un-needed question, want to make sure,) I can fill Anlage KAP to ask to returns for the bank auto deductions?

[generalmartok 465]

Hey guys,

 

I hope this is the right thread to ask my question.

So a while ago I started buying some shares of common company stock through a broker (DEGIRO). When I mentioned it to my tax verein the lady asked for a statement each year which I am able to print out relatively easily from the app directly.

So as I understand it, the broker is already deducting tax at source on any gains I make through trading.

My question is, if I was to say pay subscriptions to any services (say like getting TradingView Premium etc.) could I offset those costs from my taxable income, even though I'm an employee?

 

Thanks in advance!

[Shanks008 4]

Hey Guys,

 

I finally decided to try my luck at the equity market this year and did make make some profits. I sold some of the equities and realized the gain. This is all done using Interactive brokers.

 

I visited my Steuerberater in order to prepare for the tax returns to be filed next year for 2020. I was surprised when he said my gains will be taxed at 42% as that is my individual tax slab. I was under the impression that capital gains made from equity will be capped at 25 % with the solidarity tax (maybe 26 or 27) but not more than that.

 

This is just equities, no dividends.

 

Is this true? or did I get all this all wrong? 

[jill_ 12]

On 6/18/2017, 9:50:36, StephenGermany said:

 

Anyway, since I paid someone to do it for me, they would not do it any other way than how they thought, so I paid the US, and claimed a credit in Germany. TBD how that goes with the FA.

 

I know this post was from a few years ago, but I'm curious how other Americans are submitting proof to the Finanzamt that they paid the 15% tax on US sourced dividends since it is not called out specifically in any line item in the US tax return? 

 

We are in the process of filing an objection to our tax return because we missed this.  I was thinking to get a letter from our US tax preparer that indicates the US sourced amount in our return and send that to the Finanzamt. Would this suffice? 

[Straightpoop 703]

On 11.1.2022, 17:14:35, jill_ said:

We are in the process of filing an objection to our tax return because we missed this.  I was thinking to get a letter from our US tax preparer that indicates the US sourced amount in our return and send that to the Finanzamt. Would this suffice? 

 

That will likely not be enough.

 

You need to substantiate:

 

a.    that you actually paid US taxes on dividends from whatever source

b.    the amount of tax allocable to those dividends - as opposed to other types of income (e.g. long-term capital gains, interest, etc.) 

b.    that a specified amount of the tax paid on those dividends is allocable to US-source dividends.

 

Since some US dividends are taxable at ordinary rates ("unqualified") and others ("qualified") dividends are taxed at a maximum 15% (20% for high-rollers) rate, if you have both types of US source dividends you will have to prove the US taxes allocable to each type.

 

Your US tax return itself will not help - except to get you past the threshold question as to whether you paid any US taxes at all because it does not break down income by source.  That you will have to do using brokerage statements, etc.  (Your tax preparer may or may not be able to help since many domestic preparers do not have a clue about US "source rules".

 

Moreover, the FA may insist on proof that your copy of your tax return truly reflects your US tax liability.  There being no "Bescheid" in the US tax system, you may have to obtain a return transcript from the IRS to prove that the IRS actually received your return and processed it with the same results as those shown on your copy.  (This, by the way, can be easily done online at the IRS website and because it is fully automated you'll have the transcript in about 4-6 weeks.)

 

If you were taxed on unqualified dividends, you will need to show the allocation of your tax on ordinary income items to the amount of your US-source unqualified dividends that were included in your taxable income.

 

If you were taxed on qualified dividends or had long-term capital gains, your US tax is computed using the "Qualified Dividends and Capital Gains Tax Worksheet".  That document/form will not appear on either your own return or the IRS transcript.  If you used software to do your taxes (or a preparer) the software will usually allow this computation to be printed out.  You can then use that to allocate the tax numbers it shows to the US-source qualified dividends.

 

Simple, no?

 

[jill_ 12]

Just to post an update:

 

We did end up filing an objection to our tax return and used a letter from our US tax preparer to show the overpayment of the 15% on US sourced dividends. Included in the letter were the sections of the US-Germany Treaty that were being applied, the amount of double-taxes we paid and where the taxes could be found in our US tax return. We also provided a copy of the US tax return. The Finanzamt came back with wanting to see a copy of our brokerage statements to validate numbers, and two months later, we received confirmation that the refund from Germany was due.  So in the end, it all worked out as we hoped. 

[meatro 0]

I was able to do this as well with the same process, so thanks to everyone for their contributions.  As always, straightpoop is just owning it.

 

The rough experience was:

1) file DE taxes, pay full DE tax owed and file US taxes, pay full US tax owed

2a) DE FA did not apply the US taxes from US sourced dividends, so file official objection with the submitted US tax form in full, proof of payment (credit card statement / whatever I had) and

2b) a big ol' explanation from me (who knows if this was necessary or helped my case) explaining my work in full i.e. tax treaty references, USD to EUR conversions, which lines in the US tax forms come closest to explaining why the the tax applied, and so on.  I was hoping for and received (awesome) some good feedback from them this way where exactly they didn't understand or spotted errors.

2c) ... massage with some phone calls, emails here and there with FA München directly, who mostly referenced a specialty department somewhere else in Bayern who handled foreign affairs ...  I made some mistakes that slowed down the process as well and, again, unbelievably, got some help along the way (kudos to the FA for this, they are for real)

4) DE eventually accepted the US taxes, so I got a little pay out 9 months after 1)... next year I hope 2-3 months is doable.

 

My feeling having been through it:

If you plan on living here for a long time with a lot of US source dividends in taxable accounts, it is probably worth figuring out.  But it is a fair amount of work for the DIY tax filer and if I were "passing through" for a few years, I don't know if it'd be worth the effort or even paying a professional, depending on their rates.  You can calculate the overpay amount for yourself to see where you'd land and make a judgement call.   Or if you consider taxes your hobby, there's definitely some meat on the bone to be had here.

 

Also, a word of hope for Otto Normalverbraucher:

Practically, this whole rigamarole only appears to be a problem if you are just rolling in it:  the last few years, the Finanzamt just accepted / applied my claimed US taxes blindly.  I was so young back then.  I guess they care when the amounts involved are above some (imho very high) thresholds, something like a few hundred in US taxes claimed or four figures on DE taxes owed.  This would be in line with what I feel is the most FA policies about small fry amounts or sums where the taxes in question vs. effort applied doesn't make financial sense for them to pursue.

 

Good luck, y'all.