Section 23 EStG – What It Means for Your Taxes

When working with Section 23 EStG, the German income‑tax provision that governs private‑sale capital gains. Also known as § 23 Einkommensteuergesetz, it decides when profits from selling assets like shares, bonds, or real estate become taxable.

Capital gains tax, the levy on profit from privately held assets under Section 23 depends on the speculative transaction period, the holding time that determines tax exemption. For most securities the clock runs for one year; for real estate it stretches to ten years. If you sell after the period, the gain is generally tax‑free, otherwise it joins your regular income and is taxed at your marginal rate.

Key Factors That Shape Your Tax Liability

The tax exemption threshold, the amount of profit that remains untaxed is a crucial piece. In 2025 the threshold sits at €600 for private sales, meaning gains below that amount are ignored even if the holding period isn’t met. Above the limit, the full profit becomes subject to the marginal income‑tax rate. Understanding this threshold helps you decide whether to hold longer or realize a small gain now.

Private sale transactions, sales of assets that are not part of a business activity trigger Section 23 only when they fall under “speculative” assets. Typical examples include stocks, bonds, and second‑homes. Cars, antiques, or personal belongings are excluded, so their sale never creates a capital‑gains tax burden. Knowing which assets are classified as speculative saves you from surprise tax bills.

Real estate has its own nuance. If you sell a property that served as a primary residence, the gain is exempt regardless of holding time. However, rental or investment properties follow the ten‑year rule. The longer you keep the property, the lower the chance of a tax hit. This rule creates a direct link between Section 23 EStG and long‑term real‑estate planning.

Compliance isn’t just about calculating the right number; you also need proper documentation. Keep purchase invoices, contract dates, and proof of improvements for at least ten years. The German tax office (Finanzamt) can request these records any time, and missing paperwork may turn a tax‑free gain into a taxable one. Good record‑keeping turns the abstract rules of Section 23 into a manageable checklist.

Putting it all together, Section 23 EStG encompasses capital gains tax, hinges on the speculative transaction period, and is shaped by the tax exemption threshold. It influences private sale transactions and real‑estate decisions, while strict documentation keeps you on the right side of the Finanzamt. Below you’ll find a curated set of articles that dive deeper into each of these angles, from token‑economics to DeFi lending, so you can see how the same principles apply across crypto and traditional finance.