Tax Exemption Form for Children: How to Ensure Tax-Free Investment Income for Your Children
Tax Exemption Form for Children: How to Ensure Tax-Free Investment Income for Your Children
You've probably thought a lot about how to lay the financial foundation for your children. Whether it's the classic Savings Account is with Sparkasse or a modern ETF Savings Plan – Almost all investments have one thing in common: When they generate profits, the tax office wants a piece of the pie. However, many parents don’t realize that children have their own tax allowances. This is a huge advantage that can really pay off for your family.
If you want to make investment income—such as interest or dividends—tax-free for your children early on, you should be familiar with the tax exemption order. Used correctly, it saves you money and allows your child’s assets to grow unhindered. In this guide, you’ll learn how to make the most of the exemption, what role the tax ID plays, and how to prevent the flat-rate withholding tax from flowing unnecessarily to the government. We’ll get to the bottom of this—in a way that’s easy to understand, practical, and with the clear goal of getting the best possible outcome for your family.
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What is a waiver form—and why do children need one?
An exemption order is a document in which you instruct your bank not to tax investment income up to a certain amount. In Germany, withholding tax (also known as Abgeltungssteuer) is normally due on gains from investment assets. This tax is a flat rate of 25 percent, plus the solidarity surcharge and, if applicable, church tax. Without an exemption order, the bank automatically withholds 25% withholding tax and remits it to the tax office as soon as the first euro of profit is earned.
Here’s what makes it special: The government grants each person a so-called “saver’s allowance.” The great thing about this is that children’s investment income does not count toward their parents’ saver’s allowance. Your child is a separate taxpayer and is therefore entitled to their own tax-free allowance. This applies from birth. So if you invest money in your child’s name, you can use this allowance to keep the gross return as net income.
The Tax Deduction for Savers: Why the 1,000-Euro Threshold Is So Valuable for Your Children
The saver’s tax-free allowance determines how much investment income per year remains tax-free. Since the last increase, this allowance has been 1,000 euros per person. For you as a parent, this means: If your child’s investment account generates 1,000 euros in interest, dividends, or capital gains in a year, your child keeps all of it, provided you have submitted an exemption request.
Here is a brief overview of the current tax-exempt amounts:
| Group of people | Annual exemption amount |
|---|---|
| Individual (including children) | 1,000 euros |
| Married couples who file a joint tax return | 2,000 euros |
For children, the limit remains at 1,000 euros per child. This amount applies regardless of your own income or tax bracket. The tax deduction only applies once annual investment income exceeds the 1,000-euro threshold. Parents can file a separate tax exemption form for each minor child up to 1,000 euros. This is particularly effective for long-term wealth accumulation, as the compound interest effect is much stronger with tax-free income.
💡 Important Note: To use the tax exemption for children correctly, the investment assets must legally belong to the child. This means that the account or brokerage account must be held in the child’s name. You cannot simply “park” your own money in one of your accounts and claim your child’s tax exemption for it.
Submitting an Exemption Request: Who Is Authorized to Sign the Application?
Since your child is usually still a minor, he or she is not yet legally permitted to enter into contracts with a bank or savings bank on his or her own. This is where you come in. As legal guardians, parents must submit the exemption request on behalf of the child. In most cases, this means that both parents with custody must sign.
It is a common misconception that you can apply the tax-free allowance for children to your own investment income. This is not permitted. The money must have been given to the child as a gift. For the exemption to be recognized for tax purposes, the income must actually go to the child. The tax office sometimes takes a closer look at this, especially if large sums suddenly start flowing from the parents into the child’s account. So make sure that the investment is clearly separated.
Tax Identification Number and Online Banking: What You Need to Have on Hand
These days, you can often conveniently set up a tax exemption form through online banking. This saves time and reduces paperwork. However, in order for the bank to process the form at all, it needs one specific piece of information: your child’s tax identification number.
The tax identification number (Tax ID for short) is a number valid for life that every citizen in Germany receives by mail from the Federal Central Tax Office immediately after birth. It is a required field on every tax exemption form. Without this number, the bank is not permitted to grant tax exemption, even if you submit the application.
If you can't find the number right now, check the documents from your last tax return or contact the Federal Central Office directly. Once you have the number, you can log in to your bank's online banking portal and set up the tax exemption order. You can set the amount of the tax exemption order yourself—up to a maximum of 1,000 euros per year.
Step-by-Step: How to File a Tax Exemption Form for Children
To make sure nothing goes wrong during setup, here's a handy overview of the process:
An exemption request can only be submitted for the current year and not retroactively for past years. So if you notice in December that taxes were withheld in January, you can still correct this for the current year. However, once the year is over, your only option is to file a tax return for your child to claim a refund of the excess capital gains tax paid.
The NV Certificate: When the 1,000-euro exemption is not enough
There are situations in which 1,000 euros simply isn’t enough. Perhaps the grandparents gave a larger sum as a gift, or your child has earned very high returns through a smart investment (such as stocks or a successful ETF savings plan). If your child’s investment income exceeds 1,000 euros, an NV certificate is a useful addition.
NV stands for “Non-Assessment Certificate.” This certificate can be requested from the relevant tax office. It is particularly useful if the child’s total income (i.e., interest, dividends, etc.) is below the so-called basic exemption amount. For the year 2026, this general tax basic exemption amount is 12,348 euros.
Why is this so awesome?
With an NV certificate, investment income up to a total of approximately 13,000 euros per year can remain tax-free (basic exemption + saver’s allowance + flat-rate allowance for special expenses). The NV certificate exempts all of the child’s investment income from the flat-rate withholding tax, regardless of the saver’s lump-sum allowance.
| Characteristic | Exemption Request | NV Certificate |
|---|---|---|
| Border | 1,000 euros | approx. 13,000 euros |
| Application | Right at the bank | At the tax office |
| Validity | Permanent (in most cases) | Usually 3 years |
| Requirement | None (except for the tax ID) | Income Below the Basic Exemption Threshold |
To apply for an NV certificate, the child’s income must be low enough that it would be entirely tax-exempt. Since children usually do not have their own earned income, this is almost always the case. The certificate is generally valid for three years and must be renewed afterward. As soon as you receive the document from the tax office, submit it to your bank or savings bank. From that point on, not a single cent of withholding tax will be deducted, no matter how high the interest income is (as long as it remains within the limits).
We'll help you find the right investment for your child!
- An additional €25,703 per child, thanks to our modern ETF strategy
- Find the perfect ETF investment for your child in a 30-minute video conference from the comfort of your own home
- Sit back and watch your child's wealth grow—our experts will take care of the rest
Making the Most of Investments for Your Children: How Invest4Kids Can Help You
A well-planned wealth-building strategy for children can lay the foundation for a successful financial future. Invest4Kids helps you find the right investments and make the most of the saver’s tax allowance with the tax exemption form. We know that the topic of taxes can be a bit dry for many parents, but it’s the key to maximizing your child’s returns.
We compare different options for you. Did you know, for example, that an ETF savings plan structured as an insurance policy often has advantages over a standard bank account? With this type of solution, you often don’t have to worry about annual tax exemption requests at all, because the gains aren’t taxed until they’re withdrawn (many years later). This saves you a lot of red tape. Together, we’ll turn even small amounts into a big head start for your child’s future.
Practical Tips: Spread the Tax-Exempt Amount Across Multiple Banks
Children can split the 1,000-euro savings allowance among several banks if they have accounts at multiple banks. Perhaps your child has a savings account at the local savings bank for birthday gifts and, in addition, a brokerage account with an online bank for long-term wealth accumulation.
In this case, you can submit individual exemption requests. For example, you could request an exemption of 200 euros from the savings bank and 800 euros from the securities account provider. The important thing to remember is that the total amount of all tax exemption orders for one child must not exceed the saver’s allowance of 1,000 euros per year. If you lose track of this and exempt more than 1,000 euros in total, the bank will report it to the tax office, and you may receive inquiries.
It's best to review your records once a year. Banks usually send out the annual tax statement in the first quarter. There you can see exactly how much of your tax-free allowance has been used. If you notice that there’s still plenty of “room” left at one bank while taxes have been deducted at another, you should adjust the amounts for the next year.
Avoiding Tax Pitfalls: What Parents Should Keep in Mind
To ensure that your child’s investment doesn’t backfire, you should keep a few rules in mind. Here are the most common mistakes we see in our consultations:
- Retroactive Exemption: As mentioned, that's not possible. An exemption request can only be filed for the current year. Anyone who forgets to do so will have to pay taxes for the time being.
- Wrong name: Legally, the money must belong to the child. If the account is in your name (“Mom for Child”), you cannot use the child’s tax-free allowance. The investment assets must legally belong to the child for the tax exemption order to be recognized.
- Availability of funds: If you invest money in your child’s name, it legally belongs to the child. You may not use this money for your own purposes (e.g., a new washing machine or a family vacation). You are merely managing it in a fiduciary capacity until the child reaches the age of majority.
- Note regarding health insurance: Make sure your child’s total income does not exceed the limit if they are covered under your family’s statutory health insurance. There are income limits in place (approximately 505 euros per month). If investment income consistently exceeds this limit, the child may need to obtain their own insurance, which will incur additional costs.
Once You Turn 18: What Changes?
Once a child reaches the age of majority, the situation changes fundamentally. Starting on their 18th birthday, the child can freely dispose of their own assets. This is the moment when many parents start to feel a little nervous. The existing power of attorney that you signed as the legal representative often remains in effect for the time being, but the child should now take the initiative themselves.
By now, at the very latest, your child must sign the tax exemption form themselves or manage it through their own online banking account. The saver’s tax allowance is usually valid indefinitely until revoked or until the child reaches the age of majority. After that, it’s time for a brief conversation about finances so your child understands why these 1,000 euros are so important.
Should I submit the application by email or mail?
In the past, you had to write a letter for everything or go to the bank in person. Today, communicating via email or through secure inboxes in online banking is the norm. Many banks offer pre-filled PDF forms that you can fill out digitally.
When you apply for the non-assessment certificate from the tax office, the process often still involves traditional mail or the ELSTER portal. Once you have the non-assessment certificate in hand, you’ll usually need to submit the original to the bank by mail. A scanned copy sent by email is often not sufficient, as the bank requires the original document as proof for tax audits.
Conclusion: Make Full Use of Tax Benefits for Your Children
A tax exemption order for children allows you to receive investment income tax-free up to a certain limit. It’s a simple but extremely effective tool for accelerating wealth accumulation for your children. Whether you’re earning interest at a savings bank or receiving dividends from stocks in a brokerage account—with the saver’s allowance of 1,000 euros per year, you’re securing a fair advantage.
Take a moment to look up your child’s tax ID and check the tax exemption instructions with your banks. It often takes just a few clicks in online banking, but it will prevent you from unnecessarily handing over 25% of your profits to the tax office. As the amounts get larger, the NV certificate is your best friend for keeping up to 13,000 euros tax-free.
Do you have any questions? Just reach out to us! If you're looking for guidance or want to know which investment is the smartest choice for your child from a tax perspective, we'd be happy to advise you personally at Invest4Kids.
We make sure that more of your money stays where it belongs: with your child.
We'll help you find the right investment for your child!
- An additional €25,703 per child, thanks to our modern ETF strategy
- Find the perfect ETF investment for your child in a 30-minute video conference from the comfort of your own home
- Sit back and watch your child's wealth grow—our experts will take care of the rest
