The taxation of cryptocurrencies is becoming relevant for more and more taxpayers – because anyone who buys, sells, or uses Bitcoin, Ethereum, or other digital currencies must report this correctly in their tax return. We explain which rules apply and what you need to look out for.
1. How are cryptocurrencies classified for tax purposes?
According to a Bundesfinanzhof (BFH) ruling dated 14 February 2023 (IX R 3/22), cryptocurrencies are considered "other assets" (andere Wirtschaftsgüter) within the meaning of § 23 EStG (Income Tax Act) – not as a currency or a capital investment. Consequently: profits from sales are generally taxable as private disposal transactions (private Veräußerungsgeschäfte) – but only under certain conditions.
Depending on the type of activity, different types of income may be considered:
- Private disposal transactions (§ 23 EStG): Buying and selling coins and tokens – the most common case.
- Other income (§ 22 Nr. 3 EStG): Staking, lending, airdrops.
- Investment income (§ 20 EStG): Classic lending via platforms (flat-rate withholding tax of 25%).
- Commercial income (§ 15 EStG): In the case of professional trading or large-scale mining – Lohnsteuerhilfevereine (income tax assistance associations) are not authorized to provide advice for this category.
2. The 1-year period: When are profits tax-free?
Cryptocurrency profits are tax-free if more than one year lies between the purchase and the sale. This holding period applies to all private disposal transactions involving coins and tokens.
In addition, an exemption limit (Freigrenze) of 1,000 € per year applies (§ 23 EStG): if the total profits from all private disposal transactions are below this, they are tax-free. Important: This is an exemption limit, not an allowance (Freibetrag) – if it is exceeded, the entire amount becomes taxable.
Attention: Every swap of one cryptocurrency for another (e.g., Bitcoin into Ethereum) counts as a disposal and restarts the one-year period!
3. Staking, Lending, Airdrop & Co.: Other income
Those who do not just trade cryptocurrencies but also "put them to work" generate other income according to § 22 Nr. 3 EStG:
- Staking/Forging: Those who use coins to secure the blockchain and receive rewards in return must tax these as other income. An exemption limit (Freigrenze) of 256 € per year applies.
- Lending: Depending on the platform, those who lend coins and receive interest generate either other income or investment income.
- Airdrop: Coins or tokens received for free are taxable if a consideration (quid pro quo) was provided. Without consideration, the airdrop initially remains tax-neutral – the normal rules apply upon later disposal.
- Hard Fork: New coins resulting from a blockchain split are recorded as income at their market value.
4. Mining: Commercial income
Those who engage in mining – i.e., providing computing power and receiving new coins in return – generally generate commercial income according to § 15 EStG. Lohnsteuerhilfevereine are not permitted to advise on this; those affected must consult a Steuerberater (tax consultant).
5. NFTs: Still legally uncertain
Non-Fungible Tokens (NFTs) are treated similarly to other crypto-assets for tax purposes – profits from sales within the one-year period are taxable. However, the tax authorities (Finanzverwaltung) have not yet issued final guidelines. Further judicial clarification is expected in the coming years.
6. Tax return: Where are cryptocurrencies entered?
Profits from private disposal transactions belong in Anlage SO (Annex SO) of the income tax return. To determine profits, we recommend using specialized crypto tax tools such as Blockpit, CoinTracking, or Koinly – they generate automated tax reports based on transaction history.
Important: All transactions must be documented without gaps. If you do not receive tax reports from your exchange, you must prepare the transaction statements yourself.
Conclusion: Reporting cryptocurrencies correctly for tax
The taxation of cryptocurrencies is complex, but manageable with the right knowledge. Lexo.Tax supports you in correctly recording crypto income – contact us if you have any questions.