Bitcoin and Taxes: Who Owns the Gain After One Year?

Why Germany's Bitcoin holding-period exemption is under review — and what Section 23 of the Income Tax Act has to do with it

Editorial status: 21 October 2026 | Intended publication: Sunday, 25 October 2026, at 6:30 a.m. CET

One year.

That is, as a general rule, how long private individuals in Germany must hold their bitcoin before a subsequent gain on disposal falls outside the scope of income tax under the current rules.

Someone who buys bitcoin today and sells it at a profit after just a few months may have to pay income tax on that gain, provided the statutory conditions are met. Someone who holds the bitcoin for more than a year, by contrast, can generally realise the increase in value tax-free when disposing of it as part of their private assets.

This treatment is a distinctive feature of German tax law. While gains from selling shares are generally taxable regardless of the holding period, profits from private bitcoin disposals can escape taxation once the one-year period has passed.

But that may soon change.

On 30 September 2026, Germany's Federal Ministry of Finance published a draft bill intended to reform the taxation of certain crypto-assets. Gains involving bitcoin and comparable crypto-assets would generally be classified as investment income, regardless of how long the units had been held.

For covered disposals, the current holding-period exemption would be replaced, in principle, by a tax rate of 25 percent, plus the solidarity surcharge and, where applicable, church tax. Automatic withholding of capital income tax by relevant crypto-asset service providers would not begin until 2028 under the draft.

For now, this remains a proposal, not the law. The Finance Ministry submitted the draft for coordination among government departments. Federal Ministry of Finance.

That raises a fundamental question: Is the tax-free treatment of long-held bitcoin an unjustified privilege, or a defensible distinction between short-term speculation and long-term wealth accumulation?

And why does bitcoin fall under Section 23 of the German Income Tax Act in the first place?

The answer reveals an unusual feature of the law: bitcoin is not explicitly mentioned there at all.

Why bitcoin falls under Section 23 EStG

Search Section 23 of Germany's Income Tax Act for the word “Bitcoin” and you will not find it. Neither bitcoin nor ether nor other cryptocurrencies are mentioned by name.

The provision governs private disposal transactions (private Veräußerungsgeschäfte). Subject to various conditions, it covers land and real estate, generally with a ten-year disposal period, as well as so-called other economic assets (andere Wirtschaftsgüter), for which the relevant period is generally one year.

Those other assets may include precious metals held privately and, under current case law, bitcoin.

The decisive legal term is therefore not “cryptocurrency” but “economic asset.” German tax law interprets this concept broadly: it is not limited to physical objects. Economic interests or positions that can be independently valued and traded may also qualify.

Germany's Federal Fiscal Court (Bundesfinanzhof) confirmed this classification on 14 February 2023. In case IX R 3/22, the country's highest tax court held that bitcoin, ether and monero constitute other economic assets within the meaning of Section 23(1), sentence 1, no. 2 EStG.

The court also made clear that exchanging one cryptocurrency for another can amount to a disposal. Converting the proceeds into euros is not required. Federal Fiscal Court judgment; the court’s own press release on the judgment.

That has practical consequences. Someone who buys bitcoin and exchanges it six months later for another cryptocurrency at a profit may already have triggered a taxable transaction — even if not a single euro has reached their bank account.

Someone who holds bitcoin for more than a year and then sells it will generally fall outside the taxable event under Section 23, provided it is an ordinary disposal of privately held assets.

For private disposals made within the relevant period, there is also an annual €1,000 exemption threshold for aggregate gains. This is a threshold, not a tax-free allowance: once aggregate gains reach €1,000, the entire amount is generally taxable, not merely the amount exceeding the threshold. The calculation concerns the combined gains from relevant private disposal transactions during the calendar year. Section 23 EStG.

But the more important point is this:

Bitcoin was not granted an explicit special exemption written just for bitcoin. Its holding-period treatment follows from a general provision of tax law.

The legislature did not single bitcoin out for a tax benefit. The current treatment results from classifying it as another economic asset held in private wealth.

That is precisely why it is worth looking closely at how the law could be changed.

Why bitcoin is not expressly named in Section 23

Bitcoin does not have to be named expressly in the Income Tax Act to fall within its scope. Its current treatment derives from the general concept of an economic asset.

Lawmakers could introduce an exception or reorganise the taxation of crypto-assets. But they would also need to consider the consequences for other assets and for the broader structure of the tax system.

A new law could explicitly say that certain crypto-assets are no longer covered by the rules for private disposal transactions. Alternatively, lawmakers could establish a separate tax category or assign the gains to another type of income.

The Finance Ministry's draft takes the latter approach: gains involving certain crypto-assets that are currently covered by Section 23 would generally be reclassified as investment income under Section 20 EStG.

Removing bitcoin from Section 23 is therefore legally possible. It requires a legislative rule rather than deleting the name of an asset that the section never listed in the first place.

Neither the Federal Fiscal Court's decision nor the current statutory structure prevents the Bundestag from adopting new tax rules. The judgment explains how existing law applies to bitcoin; it does not freeze that law forever.

Nevertheless, a new approach must fit into the rest of the tax system.

If bitcoin gains become investment income, for example, an obvious question arises: why should gains from certain other economic assets continue to become tax-free after a holding period?

Physical gold provides an interesting comparison.

Gold, too, can be acquired as a long-term store of value. It has a market price, is traded internationally and is often held to preserve wealth rather than for immediate consumption. Gains on the disposal of physical investment gold held privately generally fall outside Section 23 after the one-year period.

If bitcoin gains became taxable regardless of the holding period while gains on physical gold remained exempt after one year, legislators would need to provide a substantive justification for the distinction.

That does not mean bitcoin and gold must receive identical tax treatment. Lawmakers enjoy considerable discretion in designing taxes, but distinctions still have to comply with constitutional limits, notably the equality principle under Article 3 of Germany's Basic Law.

A special rule exclusively for bitcoin would also be possible. Yet that would prompt another question: what characteristics distinguish bitcoin sufficiently from other crypto-assets for tax purposes?

Its decentralised design, restricted supply and lack of a central issuer might be relevant. Whether those characteristics could justify a particular legal distinction would require separate analysis.

The central difficulty, then, is not that bitcoin is permanently bound to Section 23.

It is the need to draw a coherent and legally defensible line between different types of assets.

What the Federal Ministry of Finance is actually proposing

The draft published on 30 September 2026 does not establish a bitcoin-only rule. It instead uses the category of exchange crypto-assets (Tauschkryptowerte).

That category is intended to cover bitcoin and ether, among other crypto-assets whose economic role includes exchanging and transferring value.

Not every digital asset would automatically receive the same treatment. The draft differentiates between exchange crypto-assets, certain stablecoins, security-like tokens and other digital rights.

This already illustrates the complexity of the reform: lawmakers must decide which technical and economic properties determine an asset's tax classification.

The Ministry argues that the crypto-asset market has evolved. Given their liquidity, speculative use and lack of physical wear and tear, certain crypto-assets are said to resemble investment assets more closely than the other economic assets traditionally covered by Section 23.

The proposal would therefore bring both certain ongoing income — for example, from lending and passive staking — and disposal gains within the framework of Section 20.

For individual investors, the consequence would be substantial. Someone acquiring covered bitcoin under the proposed new rules would no longer be able to rely on the one-year holding-period exemption when selling at a profit.

In principle, the gain would be taxable whether the investment had lasted three months, three years or three decades.

The draft also contains a significant transitional rule. As currently written, the new treatment would generally apply to crypto-assets acquired or received after 31 December 2026. Assets acquired before that date would generally continue to receive the previous tax treatment.

The new system of withholding by relevant crypto-asset service providers would begin only on 1 January 2028. The substantive tax rules and the automatic withholding mechanism would therefore start at different times. KPMG's analysis of the draft.

That distinction matters.

Under the draft as published, the reform would not retroactively subject all previously acquired bitcoin to a new permanent tax liability.

Instead, a single investor could eventually own two bitcoin holdings subject to different tax rules — solely because they were acquired on different dates.

A December 2026 purchase might therefore be treated differently from a January 2027 purchase.

These are still proposed transitional rules, however, and they could change during the legislative process.

One month apart — a different tax outcome

Consider two people. The first buys €10,000 worth of bitcoin in December 2026; the second invests the same amount in January 2027.

Both hold their bitcoin for five years and then sell their holdings for €30,000 each. Both realise a nominal gain of €20,000.

If the draft becomes law without changes, the two economically comparable transactions could be subject to different tax rules.

For the holding purchased in December 2026, the proposed transition would generally preserve the current treatment. After more than a year, an ordinary private disposal gain would fall outside Section 23.

The holding purchased in January 2027, by contrast, would generally fall within the proposed taxation of gains regardless of the holding period.

The decisive factor would therefore be not only the amount gained or the duration of the investment, but also the acquisition date.

At a rate of 25 percent, a €20,000 gain on a holding subject to the new rules would initially produce a simple tax calculation of €5,000, before any applicable solidarity surcharge or church tax.

That calculation is deliberately simplified. The actual tax treatment may depend on the saver’s allowance, other investment income, eligible losses and individual circumstances.

The saver's lump-sum allowance (Sparer-Pauschbetrag) under Section 20(9) EStG is currently €1,000 for individuals and €2,000 for jointly assessed spouses. It must not be confused with the €1,000 exemption threshold for private disposals under Section 23.

The purchase date alone could therefore determine whether a substantial part of an otherwise identical gain must be paid in tax. This illustrates why transitional rules are much more than administrative details.

When long-term saving receives different tax treatment

There is nothing inherently unusual about taxing investment income. Gains on selling shares are generally taxable regardless of the holding period.

The central question is therefore not whether the state may tax gains on assets at all. It is whether a long holding period provides a sensible basis for a different tax treatment.

A short-term trader may try to profit from daily or weekly price fluctuations. A long-term saver may instead aim to preserve purchasing power over many years or build assets for retirement.

Both may hold exactly the same asset, while pursuing entirely different goals.

The current system does not attempt to establish an investor's intention. The tax office does not have to decide whether bitcoin was purchased out of conviction or for speculative reasons. Instead, the law uses a holding period that can be objectively established.

That makes the rule relatively straightforward.

Yet a long holding period does not prove that a transaction is free from speculation. Someone betting on a large price increase may remain invested for years. Conversely, someone who sells after a few months may be responding to an unexpected financial need rather than having planned a short-term trade.

The holding period does not reliably separate savers from speculators. It does, however, establish a clear tax boundary between shorter- and longer-term private disposals.

Whether that boundary should remain is ultimately a question about the objectives of tax policy.

The apparent inconsistency between shares and bitcoin

Supporters of reform point to an obvious comparison: why should bitcoin gains become tax-free after one year when someone selling shares must generally pay tax even after holding them for ten or twenty years?

By buying shares, an investor acquires an economic interest in a company. Companies employ people, produce goods and services, and may earn profits. Buying bitcoin, by contrast, does not confer ownership of a business or a right to dividends.

From the perspective of treating private investments more consistently, the different rules may therefore call for an explanation.

The Finance Ministry's draft reflects that argument by proposing to move certain crypto-assets closer to conventional investment assets for tax purposes.

There is, however, another reasonable perspective. Bitcoin is not a corporate stake; it can also be regarded as a scarce, transferable digital asset.

In that case, is a comparison with shares necessarily more appropriate than a comparison with physical gold?

Historically, the taxation of shares in Germany was not always so different.

Until the end of 2008, gains from private share sales could generally be realised tax-free once the one-year speculation period had expired.

The introduction of the flat-rate tax on capital income (Abgeltungsteuer) on 1 January 2009 changed that framework for newly acquired shares.

For certain shareholdings acquired before 1 January 2009, the previous grandfathering protection generally remains relevant today.

This gives the current debate a historical dimension. The argument over bitcoin reprises an older tax-policy question: should a private gain accumulated over a long period become exempt from tax after a specified time, or should it be taxable regardless of the holding period?

For shares acquired under the new rules, lawmakers chose taxation regardless of the holding period from 2009 onward. A comparable change is now being discussed for bitcoin.

Tax classifications, however, need not be determined solely by which investments feel similar to an individual investor. They are legislative choices that take account of the nature of an asset, how income arises, how disposals occur and how tax can be assessed and collected.

The comparison with shares does not, by itself, prove the holding-period exemption should disappear. Equally, the comparison with gold does not establish that bitcoin must remain tax-free after one year.

What matters is which economic differences should be relevant to an appropriate system of taxation.

The political debate in October 2026

The dispute has reached the Bundestag.

On 8 October 2026, parliament voted on a bill proposed by Alliance 90/The Greens. It would have taxed gains from private disposals of crypto-assets regardless of the holding period, using the taxpayer's personal income-tax rate.

The bill was rejected by 445 votes to 132. Bundestag voting record.

That does not mean the Finance Ministry's separate reform proposal is off the table.

These are two different initiatives. Whereas the Greens' bill proposed taxation regardless of holding period at the personal income-tax rate, the Ministry's draft would generally classify certain crypto gains as investment income subject to a 25 percent rate.

The dispute cannot therefore be reduced to which parties support or oppose taxing bitcoin. It also concerns the tax base, the rate applied and how long-term private holdings are treated.

On the same day, the Bundestag approved another measure concerning crypto-assets: an international framework for the automatic exchange of information about relevant transactions.

The measure is intended to improve cooperation between tax authorities and the reporting of cross-border activity relevant to taxation.

This information-exchange measure is separate from the proposal to abolish bitcoin's one-year holding-period exemption. The Bundestag adopted additional tax-transparency rules; it did not thereby abolish the existing holding period. Bundestag report.

On 12 October, the Bundestag's Petitions Committee also considered a petition calling for the bitcoin holding-period rule to be retained.

According to the Bundestag, a petition submitted by Nicole Nowak had received 44,439 supporting signatures.

Nowak argued that the current rules encourage responsible long-term private wealth accumulation and that the proposed reform might even lower taxes for short-term traders facing high personal income-tax rates while imposing a new burden on long-term savers.

A representative of the Finance Ministry defended the proposed classification of certain crypto-assets as investments. At that time, the proposal was still undergoing interministerial coordination. Bundestag committee report.

The competing positions reflect different understandings of tax fairness.

For some, fairness means taxing economically comparable investments in similar ways. For others, fairness also requires recognising the distinction between short-term trading gains and long-term private wealth accumulation.

Both positions require a reasoned justification; neither follows automatically from the word “fairness.”

Bitcoin as a means of payment — or an investment?

Another characteristic complicates the debate.

Bitcoin was originally designed as a peer-to-peer electronic cash system. Transferring value without a central intermediary is one of its defining features.

Today, however, many people primarily hold bitcoin as a long-term store of value or investment.

That creates different perspectives on tax policy.

Those who see bitcoin as an investment may argue that its gains should generally be taxed like gains on other investments. Those who view it as money raise a different question: should merely using a privately held means of payment trigger a taxable disposal?

Under the current framework, paying for goods or services in bitcoin can count as a disposal.

For example, someone who acquires bitcoin for €1,000 and six months later spends those same units to settle a €1,500 bill may have realised a gain relevant for tax purposes.

After the one-year period, an ordinary private disposal of those units generally no longer falls within Section 23.

Under a system taxing gains regardless of the holding period, payments made with long-held bitcoin would also need to be assessed for tax purposes. That could increase the administrative burden of using bitcoin as a means of payment.

This does not imply that bitcoin must receive the same tax treatment as the euro. Bitcoin is not legal tender in Germany, and its market value behaves very differently from the euro's.

The monetary uses of an asset and its tax classification need not be identical.

Nevertheless, the example shows that changing the holding-period exemption is more than a question of tax rates.

Taxing bitcoin gains regardless of the holding period would also change the tax conditions under which bitcoin is used to make payments.

That consequence deserves a place in the discussion.

What would happen to existing bitcoin holdings?

For private bitcoin owners, the most important point at present is that a published ministerial draft is not the same as an enacted law.

As of 21 October 2026, the existing one-year rule remains in force.

Under the proposals published so far, the new tax treatment would generally apply only to exchange crypto-assets acquired or received after 31 December 2026. The existing treatment would generally remain applicable to earlier acquisitions.

There are special issues in the draft, including crypto-assets received after the year-end through lending or staking. Such inflows might fall under the new provisions even where the units originally committed to those activities had been acquired earlier. KPMG.

Whether the draft will be enacted in its current form remains uncertain.

But the distinction between existing and future holdings would be consequential. People made earlier investment decisions under a particular legal framework. Subsequent changes may affect their expectations, especially when the investment was intended to last many years.

That does not mean tax law can never be changed. Nor does it create a general entitlement to have all future disposal gains treated forever under today's rules.

Yet legitimate expectations and the ability to plan long-term decisions are important considerations for legislators.

The proposed transitional provision is therefore more than a technical detail. It bears directly on the reliability of the tax framework governing long-term private wealth accumulation.

Practical questions also remain: How will acquisition dates be documented? How will disposals from holdings acquired at different times be allocated? How will lending and staking proceeds be treated? And how will tax obligations be administered when crypto service providers operate across borders?

The Finance Ministry has addressed some of these issues in its draft, including a greater role for service providers in withholding taxes.

The final rules, however, will depend on changes made during the legislative process.

When nominal gains become taxable income

One final economic question deserves attention.

Over long periods, part of an asset's nominal appreciation may reflect a loss of purchasing power in the currency in which its value is measured.

Imagine someone purchases an asset for €10,000 and sells it many years later for €15,000. The nominal gain is €5,000.

But if the overall price level has risen substantially over the same period, the real increase in purchasing power may be much smaller.

This is not an issue unique to bitcoin.

Gains on other investments are also generally assessed in nominal terms. German income-tax law does not provide a universal adjustment of all disposal gains for inflation over the holding period.

For long-term investments, the taxable nominal gain may therefore differ considerably from the real increase in wealth.

For ordinary private bitcoin disposals after more than one year, the current rule avoids this particular issue because the corresponding gain generally falls outside the charge under Section 23.

If that holding-period boundary were removed, the taxation of nominal appreciation would become more relevant to long-held bitcoin as well.

That consideration cannot, on its own, settle how the asset should be taxed. But it belongs in an economic assessment of a reform affecting long-term saving.

What should our tax system encourage?

The debate over bitcoin's holding period ultimately raises a larger question.

Should tax law seek to treat different forms of investment as consistently as possible? Should it favour long-term private wealth accumulation over shorter-term disposals? Or should the economic function of each asset play a greater role in determining its treatment?

Reasonable answers to these questions differ.

More consistent taxation across investments could reduce distortions caused by special rules. A holding-period exemption can instead create a simple, verifiable boundary beyond which private appreciation is no longer taxed.

A more function-based system could reflect differences between payment instruments, corporate equity and commodities.

None of these approaches automatically tells us how bitcoin ought to be taxed.

They do show why the debate deserves more care than a simple confrontation between claims of undeserved tax privileges and warnings of impending tax increases.

Lawmakers can remove bitcoin from its current treatment under Section 23. They can create new rules and change existing ones. But they must decide which tax category applies, how other assets are treated and what the reform means for existing and future acquisitions.

Bitcoin's current position under Section 23 is not an immutable property of bitcoin. It is the result of a legal classification.

And lawmakers can change that classification.

Perhaps, then, we should not discuss only whether bitcoin might be taxed at 25 percent in the future.

We should first ask which distinctions between long-term saving, short-term trading and the use of an asset as a means of payment our tax system ought to recognise at all.

Taxes do more than fund public expenditure. Their design can also influence the economic decisions people make.

Someone who saves for many years may behave differently from someone who trades frequently. Someone who uses an asset to make payments may have a different objective from someone speculating on its appreciation.

That does not mean every difference in behaviour merits special tax treatment.

But it does mean that we should explain why we recognise those distinctions — or why we deliberately choose not to.

Perhaps the real question is not why bitcoin gains may become tax-free after a year. It is why we tax some long-term gains and not others — and what that says about our understanding of property, saving and tax fairness.

Sources and further reading

Current legislative debate

• German Federal Ministry of Finance: Draft Act to Reform the Taxation of Certain Crypto-Assets Held as Private Assets, 30 September 2026 (German original).
• KPMG: Reform of the Taxation of Certain Crypto-Assets Held Privately — Analysis of the Ministerial Draft, 5 October 2026 (German).
• German Bundestag: Roll-call vote on the crypto-asset taxation bill, 8 October 2026 (German).
• German Bundestag: International exchange of information on crypto-assets, 8 October 2026 (German).
• German Bundestag: Petitions Committee hearing on crypto-assets, 12 October 2026 (German).

Current German tax law

• German Income Tax Act: Section 23 — Private disposal transactions (German).
• German Income Tax Act: Section 20 — Income from capital assets (German).
• German Federal Fiscal Court: Judgment of 14 February 2023 — IX R 3/22 (German).
• German Federal Ministry of Finance: Income-tax treatment of certain crypto-assets, 6 March 2025 (German).

Historical treatment of shares and background

• German Federal Ministry of Finance: Guidance on the flat-rate tax on investment income, 14 May 2025; includes transitional issues concerning older holdings (German).
• Satoshi Nakamoto: Bitcoin: A Peer-to-Peer Electronic Cash System, 2008.

Editorial legal cutoff: 21 October 2026. The draft reform discussed here has not become law. This article is intended as an economic and tax-policy analysis, not as individual tax, legal or investment advice.