Savings Account Interest and Tax: When Flat Tax Applies

Interest on your savings account (Tagesgeld) is taxable once it, together with your other investment income, exceeds the annual saver’s allowance (Sparer-Pauschbetrag). Whether and when flat tax on investment income (Abgeltungsteuer) applies depends on how much interest you receive in the calendar year and whether you have filed an exemption order (Freistellungsauftrag) with your bank.

The most important points

• Interest on a savings account is investment income under section 20 para. 1 no. 7 of the German Income Tax Act (EStG).
• Investment income is taxed at a flat rate of 25 percent (section 32d para. 1 EStG).
• The saver’s allowance is 1,000 euros per person and 2,000 euros for joint assessment (section 20 para. 9 EStG).
• An exemption order in the official form tells your bank up to which amount it should not deduct tax (section 44a EStG).
• You cannot deduct actual expenses for investment income. The allowance replaces them.

Which interest counts as investment income?

Under section 20 para. 1 no. 7 EStG, investment income includes income from monetary claims where repayment of capital or a fee for lending the money has been agreed or actually flows. The product name and the legal form do not matter. Interest on savings accounts, fixed-term deposits and savings bonds therefore falls under this rule, and so do bonus interest payments that your bank adds on top.

What matters in practice is the income that actually flows to you during the calendar year. The account balance alone does not trigger tax. Someone who keeps 20,000 euros in a savings account but earns little interest may stay completely below the allowance.

When do you actually pay flat tax?

The flat tax depends on the income you receive in the calendar year. As long as your total investment income stays within the saver’s allowance, the tax at year-end is zero. Above that threshold, the 25 percent rate applies only to the excess. You can find more on the overall tax picture in our guide Tax return 2026: deadlines for students until 31 July 2027.

The table assumes a single person without joint assessment.

How does the exemption order work?

Without an exemption order, your bank withholds the flat tax on each credit, even if you do not exceed the allowance at the end of the year. With an exemption order in the official form, you tell the bank up to which amount it should not deduct tax. The order refers to investment income that together does not exceed the saver’s allowance (section 44a EStG).

If you split the amount across several banks, the total of all exemption orders must match the allowance. Freeing 1,000 euros at each of three banks does not give you a larger allowance. It only spreads the exemption across more accounts.

Worked example: 1,500 euros of interest in a year

Assumption: You are single, receive 1,500 euros of interest in the year, and have an exemption order for 1,000 euros with your bank.

1. The bank exempts 1,000 euros and only withholds tax on the remaining 500 euros.
2. Flat tax on 500 euros is 500 times 25 percent, which equals 125 euros.
3. Without the exemption order, the bank would have withheld 375 euros, that is 25 percent of 1,500 euros. You recover the excess only through your tax return, by reporting the income there.

If you pay church tax, the bank withholds it as well. We do not calculate it in this example, because the rate depends on your federal state and denomination.

What changes for married couples?

With joint assessment, the saver’s allowance doubles to 2,000 euros (section 20 para. 9 EStG). Couples can then share the exemption by distributing their orders across their accounts. What matters is that the total does not exceed the doubled amount.

If you are not assessed jointly, your allowance stays at 1,000 euros. Spreading it across several accounts does not change that. It is worth knowing your filing status before you set up the exemption orders.

Frequently asked questions

Do I have to report interest on a savings account in my tax return?

Check the annual statement from your bank. It shows the interest and the tax withheld. If your income stays below the allowance and your exemption order fits, the tax is usually settled with the bank. If your income is higher than the amount you exempted, review the entries in your tax return.

Does interest on a current account count too?

Interest on a current account is also investment income when it is paid. For most students the amounts are small. The allowance applies to all investment income together, not to each account separately.

Does the allowance also cover shares and ETFs?

Yes, the saver’s allowance covers investment income overall, including fund distributions and dividends. Gains from selling securities follow different rules. For crypto assets that may be treated differently from 2027, see our note on crypto gains from 2027 at 25 percent: worked example.

What is an exemption order and where do I get one?

You submit the exemption order to your bank on the official form. Many banks provide it online. You can file orders with several banks, as long as the total does not exceed the allowance.

Next steps

1. Get the annual statement for each account showing interest and tax withheld.
2. Spread your exemption orders so that the total does not exceed 1,000 euros, or 2,000 euros with joint assessment.
3. If your investment income exceeds the allowance, report it in your tax return and check the investment income form (Anlage KAP).

Related articles

• Taxes 2027 for students and career starters: overview
• Provisional tax assessment: what it means and what you can do (in German)
• Tax return 2026: deadlines for students until 31 July 2027
• Tax benefits for students: what you can deduct in 2026 (in German)

Sources: Section 20 EStG, saver’s allowance (accessed November 2026), Section 32d EStG, flat tax rate of 25 percent (accessed November 2026), Section 44a EStG, exemption order (accessed November 2026)

Last updated: November 2026. This guide is general information, not individual advice.