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Don't pay unnecessary tax on your interest income.

Interest rates have increased since 2023. Many of you opened high-interest savings accounts and earned between 3 and 4% interest in 2023.

You must be earning similarly high interest in 2024. If not, then open a savings account today.

Banks in Germany automatically deduct the capital gains tax (26.37%) from the interest you earn. However, if the total interest you earn is less than 1000€ (capital gains allowance), you don't have to pay any tax.

Thus, it's crucial that you do either of the following:

• File an income tax return and fill out the KAP form to claim back the tax you paid.
• Submit an exemption order (Freistellungsauftrag (FSA)) to your bank. This way, banks will not deduct the withholding tax (capital gains tax) from your interest income.

Who should fill out the KAP form?

1. Suppose you haven't submitted an exemption order to the bank or set its value too low. In this case, you should file an income tax return and fill out the KAP form. Otherwise, you will be giving away money. Suppose you earned 1000€ in interest in 2023. You'll be gifting around 263€ to the tax office.
2. Your personal tax rate is lower than the 26.375% withholding tax. For example, you are unemployed or earn less.

You can also use the online tax software to help you file an income tax return and fill out the KAP form. We recommend Wundertax*, SteuerGo*, and Smartsteuer*.

These software have formulated easy-to-understand questions to help you file income tax. The best part is you can complete your tax assessment for free and see how much tax return you can expect. You only pay if you file an income tax via them.

Suppose the software shows no to very low tax returns. In this case, you don't have to file a voluntary tax return.

Who does not have to pay tax on interest income?

People with little or no income (e.g., young people, students, or pensioners) don't have to pay tax on interest income. You must apply for a non-assessment certificate (Nicht­ver­an­la­gungs­be­schei­ni­gung (NV-Bescheinigung)) at your bank. This way, the bank won't deduct the withholding tax.

Your car insurance will get expensive in 2025

There are many reasons for the increase in car insurance costs next year. Here are the major ones.

• The cost of spare parts and labor has increased drastically over the past few years.
• GDV has published its new annual regional class report. In this report, the regional class of around 39 districts has increased. Regional class is based on several factors, such as the number of accidents in a region, repair costs in a region, etc. You can check if your regional class has increased here.

Regardless of your regional class, your car insurance costs will increase by around 14% next year.

So, what can you do about it?

There are many ways to reduce your car insurance cost. Here are some.

• Change your car insurance provider. Many insurers offer cheaper tariffs to attract new customers.
• Reduce the number of drivers.
• Reduce the number of insured kilometers.
• Move from Vollkasko to Teilkasko if it makes sense.

Visualization of the week

Are you curious about the cost of private health insurance after retirement in Germany? Discover how the premiums develop in old age. What do the private health insurance companies do to keep the costs stable? Last but not least, what should you do today to get the best healthcare at lower costs in your old age?

You can read about it in our guide or consult an expert to clarify your doubts.

New on GermanPedia

Launched public health insurance cost calculator 🥳 Check how much you pay for your current public insurance. Additionally, the calculator shows how much you can save by switching to more cost-effective public insurance. Go to Calculator

How to open a bank account in Germany? If you are new to Germany, you might wonder how the banks work. What documents do you need to open an account? Can you open one? We answered all these questions and more. We also provided suggestions for good banks in Germany. Open a bank account