How can capital losses be claimed for tax purposes?

Capital losses arise not only from price losses but also from the total loss of an investment, e.g. in the event of a debtor's insolvency. If a loan is lost, this loss can be considered as negative income from capital assets for tax purposes. After all, returns and profits from capital investments are taxable according to § 20 para. 2 no. 7 EStG.

Case law on debt defaults

For a long time, the tax authorities did not recognise such losses. However, tax courts and the Federal Fiscal Court (BFH) have corrected this: Since the introduction of the withholding tax in 2009, all changes in value – both gains and losses – at the asset level must be taken into account for tax purposes. There is no longer a separation between income and assets (BFH rulings of 12.05.2015, IX R 57/13 and of 24.10.2017, VIII R 13/15).

Tip: Declare the loss in the tax return

In the event of a total loss (e.g. insolvency of the issuer), the acquisition costs can be claimed as losses from capital assets. If this is rejected by the tax office, an objection should be lodged, referring to the above-mentioned BFH rulings.

Loss offsetting: Limit lifted

Since 01.01.2020, there was an annual offset limit of 20.000 Euro for such losses. Unused losses could be carried forward to subsequent years (§ 20 para. 6 sentence 6 EStG).

With the Annual Tax Act 2024, this limit was abolished – retroactively for all open cases. § 20 para. 6 sentence 6 EStG was deleted without replacement. Losses can now again be offset without limit against other capital gains.