Time rapidly approaching as tax relief provision for stock market losses is about to be implemented.
Ready, Set, Act!: Here's the lowdown on avoiding throwing your hard-earned cash away if you took a hit at the stock exchange in 2024. Got losses you want to offset with gains? Mark your calendar: December 15 is the deadline. But hey, it's a Sunday! So don't sweat, big online brokers let you request those loss certificates all the way up to 11:59 PM on that day.
Background:
So, folks with multiple financial accounts, take note: if you're eying to offset those stock losses from sales across institutions with other stock gains, remember this - you'll need a loss certificate, and it has to be snagged from the respective deposit bank by December 15, 2024. Same goes for couples filing jointly, trying to offset their realized stock losses across accounts.
This year's quirk:
Watch out, December 15, 2024, ain't a banking day, it's a Sunday. But worry not, big online brokers don't mind. "Customers can request a loss certificate via their accounts until 11:59 PM on this deadline," dishes out Axel Hartmann from Consorsbank's Communications Department. "We're available 365 days a year, 24/7 via various channels," agrees Maike Pelikan, Comdirect's spokesperson. "Currently, there's no order to request a loss certificate in our online banking, customers can do so until December 15," notes Klaus Winker, Deutsche Bank's spokesperson. "If the loss certificate is ordered in a branch, the final date this year is December 13, 2024."
The Karlsruhe model:
Currently, realized stock losses are only offsettable with gains from other stock sales, not funds and bonds, nor with interest and dividends. Now, if you realize stock losses in 2024 and want to offset them later, you might benefit from a pending model procedure (Az. 2 BvL 3/21) at the Federal Constitutional Court. All decisions since 2009 on whether the loss offset restriction for stock losses is constitutional are now provisional.
For married investors:
The previously barred "marriage-across" loss offset via tax return was first allowed for the tax year 2023 by the tax administration. Since the Tax Adjustment Act 2022, spouses generally still need a loss certificate. After issuing a loss certificate, the bank sets the "loss offset fund" to zero, preventing the bank from offsetting losses claimed in the income tax return with gains in the following year.
The derivative twist:
With the now unrestricted loss offset of derivatives like CFDs and options, investors should still report realized losses in their tax return. The abolition of the offset restriction applies retroactively to all years not yet finally assessed. However, banks will be granted a transition period until early 2026 to adjust their IT systems.
Read more: Tax shockwave has passed! Here's what's in store for investors and pros
For investors in Germany seeking to request a loss certificate ("Verlustbescheinigung") to offset realized stock losses by December 15, 2024, the key requirements and procedures are as follows:
Specific Requirements and Deadline
- The loss certificate must be requested by December 15, 2024 at the latest. This deadline is critical to ensure that losses realized in the current tax year can be properly documented and offset against capital gains for tax purposes[5].
- The certificate serves to declare realized losses from the sale of stocks (and possibly other securities) that can be used to offset gains and reduce taxable income from capital assets.
Procedure for Requesting a Loss Certificate
- Investors should request the loss certificate from their bank or broker where the securities account is held.
- Typically, brokers and banks issue the Verlustbescheinigung free of charge upon request.
- The request can often be made online or in person at branch offices, but availability depends on the specific broker or financial institution.
- For large online brokers, it is generally possible to request the loss certificate online via their customer portals, allowing investors to conveniently obtain the document without visiting a branch[5].
- If an online request is not available, investors can visit the broker’s branch office or contact their customer service to obtain the certificate.
Additional Considerations
- The loss certificate documents losses that can only be offset against gains within the same income category (capital gains) and do not offset other types of income[1].
- Due to ongoing legal scrutiny on the treatment of stock losses in German tax law (for instance, the Federal Constitutional Court examining the constitutionality of loss offset restrictions), investors should ensure documentation is complete and timely for tax filing[1].
Summary
To summarize:
- Request the loss certificate by December 15, 2024.
- Request it directly from your bank or online broker.
- Most large online brokers provide an online service for this, but traditional branches and customer service are available if needed.
- Use the certificate to offset realized stock losses against capital gains in your tax declaration.
This ensures you benefit from loss offsetting in your 2024 tax return.
[5] provides the direct deadline and procedural context, while [1] explains the legal background of loss offsetting.
- For individuals who want to offset their realized stock losses against gains in their personal finance, it's crucial to request a loss certificate from their respective deposit bank by December 15, 2024.
- Since many online brokers offer an online service to request a loss certificate, investors can do so from the comfort of their homes, even if December 15 is a Sunday.
