Are Capital Gains from Stocks Taxed in Germany and Asset Inheritance Taxes?

Question from msr, Are Capital Gains from Stocks Taxed in Germany and Asset Inheritance Taxes?

Answer from AI:

Taxation of Capital Gains from Stocks in Germany

In Germany, capital gains from stocks are typically taxed under specific conditions. If you hold stocks for more than a year, the gains are usually tax-free. There is also a tax-free allowance of up to €600 per year for capital gains, which applies to all capital investments, including stocks.

Analysis of Each Income Source

• a. Military Pay / Federal Government Pension: Generally not taxed in Germany.
• b. VA Disability Benefits: Not taxable, as they are considered compensation for services.
• c. Survivor Benefit Plan (SBP): Not taxed, similar to other pensions.
• d. Social Security Benefits: Taxable in Germany, though the US-Germany tax treaty may provide exemptions or credits.
• e. Rental Income, Interest, Dividends, 401K: All taxable in Germany. Dividends are subject to a 25% withholding tax plus a solidarity surcharge.
• f. Roth TSP, Roth 401K: Since taxes were paid in the US, withdrawals are typically tax-free in Germany due to the tax treaty.

Estate Tax Considerations

Germany imposes inheritance tax on assets exceeding the €500,000 exemption for spouses and children. The tax rate can be up to 19% for spouses and children. However, the US-Germany tax treaty may prevent double taxation. Consider estate planning strategies such as trusts or utilizing treaty benefits to mitigate taxes.

Recommendations

Consult a tax professional to navigate the complexities and ensure compliance with both US and German tax laws. Consider estate planning to minimize tax burdens on your heirs.