Children's Investment Tax in Germany: Allowances and Gifts

expats.de has explained German finances since 2014. This guide describes the German mechanisms checked on 17 October 2026. It doesn't calculate your child's tax liability or recommend transactions to preserve benefits. International families also need to consider other countries. Use the opening guide for account documents and the junior comparison for product terms.

Start with the account holder and the income

A child-owned account is separate from the parents' accounts. Interest, distributions and realised investment gains can belong to the child for tax purposes when the ownership is genuine. A private note saying that your own depot is “for the children” doesn't change its account holder. Nor does a Junior Depot permit parents to reclaim gifts whenever convenient.

Distinguish money paid into the account from income produced inside it. A cash gift doesn't become interest simply because it arrives at a bank. A securities sale may realise a gain even when the proceeds remain invested. A rising portfolio value and a realised gain also differ. Those distinctions determine which records you need and which event a tax rule addresses.

Keep statements for all of the child's accounts, including accounts abroad. A German bank's withholding service only processes what it is responsible for. It cannot guarantee that every income source or foreign reporting obligation is covered. If you need a complete household comparison or an individual tax calculation, take the records to a qualified tax adviser.

The child's savings allowance

The individual Sparer-Pauschbetrag is €1,000 per year under § 20(9) EStG. It applies to qualifying capital income, not to the size of the depot or contributions. A larger account can have little realised income, while a smaller account can generate substantial taxable gains through sales.

The child's allowance is separate from the parents' allowances. If the child uses several banks, don't grant each bank the full amount independently. Keep one record of the allocations and check it when interest, distributions or sales change. Unused amounts at another bank don't necessarily prevent withholding where the income actually arises.

The bank needs the child's information for the relevant instruction. Check its confirmation after submitting or changing it. If withholding already occurred, keep the annual tax certificate and ask which correction or tax-return procedure applies. A missed instruction doesn't justify changing the beneficial owner or inventing a different payment date.

The basic allowance concerns total taxable income

The German Grundfreibetrag for 2026 is €12,348 under § 32a EStG. It concerns taxable income across the relevant categories, after the applicable tax rules. It isn't an additional bank instruction that every child can use automatically, regardless of other income.

A bank advertisement may add several allowances into one headline amount. That shortcut depends on assumptions about income and deductions. It doesn't show whether your child qualifies for free family health insurance, student aid or another country's exemption. Check those systems separately. A job, other investment accounts or a foreign income source can change the assessment.

Don't use the depot balance alone to decide that no tax will arise. A balance doesn't identify distributions, realised gains, losses, fund tax treatment or other income. Collect the year's statements before drawing a conclusion. Our general capital-gains guide explains the wider German framework for investment income.

Freistellungsauftrag and NV certificate do different jobs

A Freistellungsauftrag tells the bank to apply the allocated savings allowance before withholding. Use the child's name and tax ID. Check the sum of the allocations across institutions and the bank's effective date. Review the record when opening another account or moving cash. The instruction doesn't transfer a parent's allowance to the child.

An NV-Bescheinigung is a certificate from the Finanzamt. Under § 44a EStG, it supports exemption from withholding when the authority expects the relevant income-tax conditions to be met. It can last at most three years and can be withdrawn. Submit it through the bank's accepted process and review changed circumstances; the certificate isn't a permanent exemption.

Prepare an income forecast and the child's account details when applying. Identify which office is responsible for the child and use the current official form. An approximate account balance cannot replace the requested information. Ask the tax office how to handle a new income source or a change in residence. Keep its response with the certificate and bank confirmations.

If the bank continues to withhold, first check receipt, validity dates and the account holder. Keep the deduction records rather than assuming that money has been lost permanently. The appropriate correction depends on the facts and the procedural stage. A certificate also doesn't instruct a health insurer or benefits office to ignore the same income.

Accumulating funds can create taxable income without a payment

The Vorabpauschale is a deemed-income mechanism under § 18 InvStG. It can apply when a fund's distributions fall short of the calculated base income. The calculation has limits linked to fund performance. Accumulating income therefore doesn't guarantee that no taxable investment income arises during the holding period.

The BMF publishes the relevant annual basis rate. It isn't the fund's actual return or a promised yield. Don't reuse an earlier year's rate for a different assessment. Fund classification, distributions, holding period and market performance can affect the bank's calculation.

Read the bank's year-end notice and keep cash available if it needs to collect tax. Allowances or an accepted NV certificate may affect withholding. A distributing fund can also have a Vorabpauschale if its distributions are insufficient. When units are eventually sold, previously recognised amounts matter for the taxable gain, so preserve the acquisition and tax records through any depot transfer.

Gifts and their later returns are separate

For gifts from a parent to a child, § 16 ErbStG provides an allowance of €400,000 per parent. § 14 ErbStG aggregates relevant acquisitions from the same person within ten years. Two parents are separate donors; gifts from the same parent through different accounts don't become separate donor allowances.

The allowance concerns the gift relationship. It isn't a tax exemption for future investment returns or a guarantee that no notification is required. Other donors have different rules. Don't apply the parent-child amount to a grandparent or godparent. An ordinary birthday gift and a substantial asset transfer can also require different legal analysis.

Keep the donor, recipient, date, amount or transferred holdings and any conditions in a gift record. Retain bank evidence showing the actual transfer. For securities, preserve acquisition data as well. A bank transfer note alone may not explain an arrangement involving several countries or a retained right over the assets. Seek advice before implementing conditions you haven't had checked.

A genuine gift belongs to the child. Temporarily parking a parent's money under the child's tax ID doesn't create unrestricted access for the parent. At adulthood the child takes control of its existing property; that handover isn't a new gift of the same portfolio. The ownership guide explains why that decision precedes the account application.

Social benefits assess their own definitions

Means-tested benefits can consider assets and income even when German income tax is nil. § 12 SGB II governs the relevant asset framework for that system. Other benefits use other provisions. Determine which benefit is involved, whose property the account contains and which assessment date applies before drawing conclusions.

Declare accounts and transactions as required. A child's portfolio doesn't become invisible because the parents manage it. Equally, the existence of a depot alone doesn't tell you the outcome: exemptions, household rules and the particular application matter. This guide deliberately gives no individual entitlement calculation or advice to shift ownership to pass a means test.

Free family health insurance has a separate income test under § 10 SGB V. An NV certificate doesn't certify eligibility for that insurance. Ask the insurer how it treats the child's expected investment income and any other earnings. Provide the documents it requests and report changes. Don't treat the income-tax basic allowance as the insurance threshold.

BAföG looks at the student's own assets

A child-owned depot can become relevant when its adult holder applies for student aid. § 27 BAföG defines assets, and § 28 BAföG addresses their valuation at application. Existing holdings matter; it isn't only cash withdrawn from the account that needs consideration.

Keep a statement for the relevant application date and evidence explaining ownership. The future rules may differ from today's rules, so don't promise a newborn a particular student-aid result. The responsible office assesses the application. Before giving away or selling assets in anticipation of an application, seek independent advice about the consequences and disclosure requirements.

International families need another layer of records

A German savings allowance doesn't settle tax abroad. Your child's citizenship, residence or other connections can produce foreign reporting obligations. Investment funds can receive different treatment in another country. The bank's German annual statement remains useful evidence, but it isn't a cross-border tax opinion. Obtain advice before choosing investments for a US-taxable child or transferring substantial assets internationally.

Before a move, request the bank's policy for the destination and update tax-residence information accurately. Retain acquisition history, gift records, distributions and tax deductions outside the app. A change of country can affect withholding, certificate use and continued trading. Ask about exit taxation where relevant instead of assuming a blanket exception for minors.

Keep a repeatable review routine

After each year, reconcile the child's accounts, allowances and tax certificates. Record gifts separately from investment returns. Review any NV certificate against changed income and its expiry date. Keep documents for the health insurer and benefits office separate because their questions differ. Don't wait for the child's adulthood to reconstruct the portfolio history.

Before a large sale, gift, move or application for support, gather the records and obtain advice on that event. This guide isn't suitable for deciding an individual tax bill or an entitlement dispute. Its practical purpose is to help you ask the right office a complete question, with the child's ownership and income history already documented.