Living From Cryptocurrency In Germany? A Reality Check

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Like many of us, I'm somewhat obsessed with the concept of living from cryptocurrency instead of relying on my everyday job's salary to pay the bills. I'm pretty confident that this is eventually going to be possible and I certainly don't have any intentions to work until I'm 67 or whatever age we'll be able to retire on in 30 years from now. With the current bull run and the value of all my assets skyrocketing, though, I've started to wonder how realistic it would be to live from cryptocurrency in my home country of Germany right now. So in this article, I'm going to discuss how much money I'd need to earn from crypto, what the greatest obstacles are, and what I expect to see in that regard in the next 3-5 years.

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The first question that needs to be answered is how much money I'd need to be making per month so that I could quit my everyday job and live from cryptocurrency exclusively. As easy as the question may sound, it's not that easy to answer. Right now, I earn about 3,500€ from my everyday job after taxes and mandatory insurances. I certainly wouldn't need as much money per month to keep my current lifestyle. In that regard, about 2,000€ would suffice to pay for rent, food, other necessities, and still have enough for the occasional holiday trip and random spending on a night out. I could probably cut that amount in half if I moved to the countryside and stopped some of my worst spending habits. To tell the truth, though, I don't think I'm prepared to do so just yet.

The other issue at hand is the fact that my employer also pays parts of my mandatory insurances. In Germany this is enforced by law, my mandatory health insurance alone is ~900€. Half of that is covered by my employer and the other half is deducted from my salary automatically before I receive my money. While this is the biggest chunk, there are other mandatory insurances that I'd have to pay. So all things considered, I'd say earning about 3,000€ per month after taxes would allow me to keep my current lifestyle and quit my everyday job. After taxes is the biggest concern in that regard, though. German taxation simply doesn't get cryptocurrency and while that's cool in many cases, it's an issue if you want to start living from it.

In German tax law, cryptocurrency isn't considered money. It's only a thing. You are free to do anything you want with things, like exchange them for other things. As long as you don't convert them to money, this is not considered a taxable event. This is why, as a German, you'll always use stable coins as trading pairs. As far as our tax law is considered, you never made any money through these trades, you just exchanged one thing for another. Obviously, the German state still wants it's money, though...

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The moment you exchange any cryptocurrency to fiat, you create a taxable event. And we are not talking a small amount, we are talking 42% in my case! The good thing about this is that these taxes only accrue if you sell your crypto within one year of acquiring it. After that period, it's completely tax free. Since German tax law really doesn't get crypto, though, every time you move a token from one wallet to another this timer starts again, because obviously this isn't the same coin any longer. Right.

So in essence, as long as you never cash out your cryptocurrency, you don't have to pay any tax. But the moment you want to do so, you have to make very sure that your tokens have already been sitting at Coinbase for at least a full year. Not even talking about the risks of having your money sit on an exchange, this is still really annoying. With price fluctuations, market cycles, and everything, you are bound to loose a lot of money in the process. Ideally, you'd convert your token to DAI, move it to Coinbase and sell it for fiat one year later. This way, I'd at least know what to expect in exactly one year.

Judging from the above, I believe it's pretty obvious that exchanging cryptocurrency to fiat to pay the bills is not very viable right now unless you are able to wait a full year for your money or you are okay with only receiving 58% of anything you sell. Consequentially, the next question would be whether you'd need to convert your crypto to fiat in the first place. Long answer short: It's not really an option yet. Even with Covid-19 and everything, it's not even possible to pay cashless everywhere in Germany. We sure love cash around here. There are some services like Delivery Hero that accept Bitcoin, but even then the fees for doing so are absurd and, obviously, the state expects to be paid in cold cash just as well.

To tell the truth, I don't think it's really possible to live from crypto in Germany right now, unless you either earn so much that you really don't care about waiting a year for your money or you try to cheat the system and just don't declare your taxes. To be very clear here, so far you can hide your money from the German administrative system by simply moving it to Paypal. For a country considered to be a technology leader, our bureaucracy is utterly incompetent in that regard. The issue is, though, this is going to change eventually and really, I value my freedom too much to ever try anything funny in that regard. Tax evasion is considered a major offense after all and I really don't want any of that.

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So even if I was to earn these 3,000€ in crypto each month, which crazy enough just might be possible eventually, German tax law won't allow me to live from that and stop my everyday job. That fact might be a bit depressing, but the good news is, I can still freely accumulate without having to care for taxes at all. Eventually, things are going to change. From experience, I expect my government to eventually start to regulate and maybe even ban cryptocurrency. This might go on for a couple of years before they realize it can't be stopped. After that happened, they'll start to tax it differently, probably making every transaction a taxable event. While this is going to be just as annoying, at least financial transactions only have a 25% tax rate and they only apply to the amount of money gained in the process.

My best bet is that this is going to take at least another 5 years to manifest. So until then, I'll accumulate whatever I can. For now, I can't quit the hamster wheel without paying absurd fees or turning criminal. But eventually, I'll be able to do so and I'm really looking forward to this very day!

And that's all from me for today! Thank you all for reading and see you next time.

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49 comments
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Very interesting read :)
I was wondering the same thing for a while, as I think there is zero regulatiion for crypto where I live.

As you said, living from crypto only might not happen this year, but in a few years maybe, and I'm wondering how the system will look at this.

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Thank you!
I'm pretty confident it will be possible eventually, the hard part will be to get through the regulation/banning phase unharmed. If you make the wrong move at the wrong time, it could really hurt your holdings a lot - at least that's the case here in Germany.

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To tell the truth, I don't think it's really possible to live from crypto in Germany right now, unless you either earn so much that you really don't care about waiting a year for your money or you try to cheat the system and just don't declare your taxes.

As long as there is light at the end of the tunnel, it's worth trying ^^
Do not know why but I started giving some more credits to central exchanges it might be related to more eyes are on crypto market and they can hardly make exist scam under the current sentiments. Whatsoever, living from crypto will be possible at most in 5 years imo 😏

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It certainly is worth trying. Yes it will take some more time, but the outlook is bright :D

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(Edited)

Actually i get latelly a crypto ammount similar with my full time job, but i do not have the courage, yet, to stop working. I was just checking the legislation on both two countries i live right now. Romania, if you do it legally, got a 10% tax on profit, while UK, has a 10k limit for free i think, 20% up to 40k something and 40% after. Not really checked, just talked with friends, so i am not accurate on numbers.

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I really wasn't accurate either until I started to check everything. So far, the whole crypto space is really unregulated, which is a boon if you do it "on the side" but a major issue if you want to do it full time.

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What about if you keep your crypto on the Nexo platform, earn interest, and take out the loan to cover the expenses?

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Interesting question, that might actually be viable. Taking a loan is not a taxable event, neither is repaying it. Need to read into that more, but you just might have found a way around the whole issue!

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If LEO gets to $10 you will only need to earn 300 LEO per month and there you have your crypto income.

Have you tried the Binance card by the way?

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I'm using Binance for my trading so I never convert to Fiat and thus never have to pay taxes.

$10 LEO would be epic and the fun thing is, it certainly is viable to get there eventually!

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I see. But if you use the card to spend crypto, like BUSB for example, do you have to pay taxes?

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I'd have to pay taxes the moment I convert any token to fiat. As long as I avoid that everything is completely tax free.

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The situation is much worse in the UK. Ebery time you exchange one crypto for another it's a taxable event. There are even rules to prevent you selling it in the last month of the tax year and then buying it back at the beginning of the next one. There is a lot of talk in UK tax discords about moving to places like Portugal or Malta so as not to have to pay capital gains tax on crypto earnings.

However, you have to live abroad for 5 years before you can choose tax in another country and you can't have abiding ties in the UK while you do so.

Add to that the government has said they may reduce the capital gains allowance substantially in a couple of months and things are not looking good. 😢

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I expect similar things to happen here as well, eventually.
Governments don't like cryptocurrency. It allows the average person to break the hamster wheel and achieve financial freedom and that's about the last thing our governments want to see happen... ;-)

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Another reason to be cautious in thinking about moving abroad I think. Especially to places like Portugal who, at the moment, have favourable tax rules. As you say, that could easily change.

If moving abroad I think it needs to be to somewhere that specifically states that it's crypto favourable. Imagine moving your life and then 4 years down the road your new Government changes it's mind before you reap the rewards. 😂

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Aye, that would really be the worst case.
Also, I like it in Germany, I have a lot of friends here, and I'm not prepared to leave that behind... yet ;-)

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wtf with these regulations. one year... and you need the stable coins as well... oh man, i hope with all the fuzz btc and cryptos have now to see a more logical regulation because for sure we gonna see some new regulations :P

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Aye, these regulations simply don't make any sense at all.
But I fear things will get worse before they get better...

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(Edited)

You could found a company, for example in Slowakia, and pay 19% flat-tax + 7% dividende tax. So you would "only" pay 26% taxes, but its better than 42% right? If you have no income in Germany at the same time, you dont have to pay anything additional because of the DBA; if you additionally have a German income you may get ranked in a higher tax-class. So just make sure you dont earn any money in Germany. Best thing: Its completely legal, you just have to get a little bit into international tax-law ;) And for health insurance: you can go to a private insurance company and you would pay appx. EUR 300-500 per month if you earn just EUR 2000.

Best regards from Vienna!

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Cheers! And you are right, there are a lot of options available if you are prepared to leave the comfort zone and look internationally. Ultimately, it comes down a lot to the amount of risk you are prepared to take. I'm not prepared to do that yet, but I'll make the move if German regulation should ever get out of hand.

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Sure. Depends on how you want to live or your lifestyle as well. 😉

Wenn du wirklich erstmal komplett in Deutschland bleiben willst, kannst du aber auch neben deinem Job eine Selbststaendigkeit anmelden und von der Kleinunternehmerregelung gebrauch machen (max. Jahresumsatz bis EUR 22.000). Dann wuerdest du nur Einkommenssteuer zahlen & wenn du es schaffst dein Einkommen durch Geschaeftsausgaben sehr gering zu halten, zahlst du eh fast gar nichts. 😁😁 Wuerde ich einfach mal mit dem Steuerberater durchsprechen..

LG Johannes

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Danke für den Hinweis, ich denke das ist wahrscheinlich eine ganz gute Option. Im Endeffekt ist derzeit einfach noch sehr viel unreguliert, ich finde es aber wichtig sich frühzeitig mit den Optionen zu befassen :-)

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Stimmt. Finde dieses Thema auch allg. sehr Interessant 😊 hoffe dass dein Beitrag auch ein paar andere Menschen anfangen laesst sich darueber mal Gedanken zu machen.

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I bet that sooner than later someone will come with a solution for this, for example a way to cash out your Hive directly to euros, that way you could have your stake sitting on your wallet and you would elude to pay that annoying 40%. As the spanish essay "Law done trap done".

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Correct, that would be perfect - a way to automatically cash out after exactly one year of holding. As far as the German tax law is considered, though, Hive Power and Liquid Hive are obviously completely different things, so it would need to be powered down for a year or I would have to directly sell Hive Power.

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Not too long ago, I heard a lecture on this from a law firm that specializes in cryptocurrencies. According to this, tokens that grant interest are not affected by the one-year holding period, the holding period for tax-free cashing out is 5 years for these tokens - as far as my memory is not failing me right now. The interest must also be taxed separately. I can look it up on the weekend and pass on the exact information when I think of it.

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In Portugal it's still heaven; as long trading is not your profession, nothing is taxable until now. Apart from the growth in value, the passive income due to staking and LP is something that seems pretty interesting in the long term for me. And who knows, maybe sooner than later you don't need to convert anything and can spend crypto directly!

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That would be ideal of course, but I think that's still a long way to go, at least here in Germany.
I keep hearing great things about Portugal, moving there might be another option to consider if things go south regulation-wise.

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Very nice! Thanks for starting this very valuable discussion.

I have been contemplating the possibility of living of crypto myself and your post made me realize I'm very unprepared to make that shift eventually. I don't really know how the law on crypto taxes stands where I live.

I'm not too worried about it right now thou because, for the moment, my plan is to earn enough from crypto that in the case of an emergency I have something to hold on to but I definitely will be digging deeper in the matter.

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I think that's the right thing to do right now. If you don't need to tap into your crypto holdings, it's probably best to just accumulate more so you can make the switch once everything has been figured out.

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I feel like living off your crypto is like trying to be a professional poker player. It really changs your perspective on the game and makes your tilts much more severe and devastating. I would think that you might be prone to make mistakes with your crypto when your live depends on it.

I think having a good paying job where you might be able to invest some of your monthly surplus is much more fun than draining your crypto every month.

You should maybe think about swapping some of your crypto into other assets at some point like real estate or gold. Gold is completely tax free.

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Good point, it certainly changes the way you feel about crypto once you have to rely on it to pay your bills. Real estate is actually something I've considered already, I don't care for a Lambo or a Yacht, but having a nice little house somewhere in the suburbs would do... ;-)

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Real estate is an investment, expensive cars are not unless you are actually collecting and not using them.

It is really hard to say if now is a good time tho because prices are pretty high again, but I guess you have the time to look for a good opportunity.

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English translation down below

Der Schnelligkeit halber auf deutsch, übersetzng darunter.
Nach meinem Wissensstand werden Cryptos anders behandelt, also jeder Tausch zählt als steuerpflichtiges Ereignis, das betrachtet wird, falls da Kursgewinne erzielt wurden. Ob der Token von wallet a nach b gewandert ist ist egal in Bezug auf die Haltezeit, sofern nachweisbar ist, dass es deiner ist.
Durch Mining erzeugt Token sind meines Wissens nach nicht steuerpflichtig, die Frage da wäre wie es sich mit Hive verhält. Airdrops sind wohl auch nicht steuerpflichtig.

Ist jedenfalls mein momentaner Wissensstand. Und wenn man wirklich davon leben will, dann muss man echt darauf achten entweder die Haltezeit von einem Jahr zu erreichen oder die anderweitig steuerfrei durchbekommen, denn keiner wird z.B. monatlich exakt 2000€ auszahlen, wahrscheinlicher ist eher bei einem guten Kurs eine größere Menge auszuzahlen, wodurch die Abzüge durch die Steuer enorm nach oben schießen können, wenn man z.B. 100k auszahlt.

Am Besten vorher mal einen Steuerberater befragen, der dich mit Cryptos auskennt. Diese Art von Steuerberater sollte dieses und nächstes Jahr sehr gefragt sein haha.

Bin kein Steuerberater, also meine Sachen nochmal selber ordentlich recherchieren. Aber bitte mach es wirklich nochmal, denn mal eben einen Berg in Tether zu wechseln und das ein Jahr bei einer Börse liegen zu lassen könnte zu einer sehr bösen Überraschung führen.

As far as I know, cryptos are treated differently, so every exchange counts as a taxable event that is considered if there were gains made. Whether the token migrated from wallet a to b does not matter in terms of holding time, as long as it can be proven that it is yours.
Tokens generated by mining are not taxable as far as I know, the question would be how it behaves with Hive. Airdrops are probably not taxable either.

At least that's my current knowledge. And if you really want to live from it, then you really have to pay attention to either reach the holding period of one year or otherwise get through tax-free, because no one will e.g. pay out exactly 2000€ per month, more likely is to pay out a larger amount at a good rate, whereby the deductions by the tax can shoot up enormously, if you pay out e.g. 100k.

It is best to consult a tax advisor who knows about cryptos. This type of tax advisor should be in high demand this year and next haha.

Am not a tax accountant so researching my stuff properly myself again. But please really do it again, because just changing a mountain into Tether and leaving that with an exchange for a year could lead to a very nasty surprise

Translated with www.DeepL.com/Translator (free version)

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Das Thema Stablecoins hatte ich so mit einem befreundeten Steuerberater bereits mal besprochen, allerdings nur als Privatperson. Er ist da nicht drauf spezialisiert und wird sich sicherlich auch nicht die Finger verbrennen wollen ;-)

Im Endeffekt ist das wirklich ein großes Wachstumsthema für Steuerberater, in der Richtung wird in absehbarer Zeit doch so einiges passieren. Wenn ich den großen Schritt irgenwann machen sollte, dann definitiv nur mit einem Steuerberater dahinter der mir da eine gewisse Sicherheit geben kann. Bis dahin bleibt alles im (steuerfreien) Cryptoraum.

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Steuerfrei ist es aber nur nach einem Jahr (bzw bei Airdrop und mining), wenn man innerhalb dieses Jahres Coins gegen andere tauscht wird das zu einem zu versteuernden Ereignis, sofern man dabei Kursgewinne hatte. Das ist nicht erst, wenn man in fiat wechselt, das darf man nicht vergessen. Sonst könnte man jeden Gewinn in tether stecken, da ein Jahr warten und hätte mit einem Jahr Verzögerung seinen Gewinn steuerfrei ausgezahlt, was Steuern im Cryptobereich komplett aushebeln würde. Wenn das so gehen würde, würden sich nicht die Leute soviele Gedanken um Steuern machen müssen xD

Wird bei mir auch ein wirres Durcheinander, Hive ist da ja recht einfach zu handhaben, aber alles andere brrrr. Mit der Haltedauer von einem Jahr klappt das zt jetzt ja auch nicht mehr, denn cryptos werden ihr Peak wahrscheinlich nicht erst in einem Jahr haben, sondern früher und wenn man das mitnehmen will wird es interessant. Wenn man nicht alles auf einen Schlag geholt hat und auch nicht komplett auszahlen will kann einem ja Fifo noch helfen, da ein Teil der coins ja älter sein kann als ein Jahr z.B.

Ist ein recht kompliziertes Thema, weil unser tolles steuersystem das noch nicht richtig behandelt und jeder Fall einzeln betrachtet werden muss...

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I think the key is keep the fiat income coming in and use the crypto as a nice little retirement fund - I'm going to take out as much as I can to keep me just below the CGT tax threshold in the UK now i've done OK - for you it's not too bad holding a stable coin on Coinbase for a year - I guess it's it's just like taking profit on the way up!

The loan option is an interesting one, assuming you can count a loan against CGT. It's a risk though!

TBH if your gains are looking anything like mine, what's 20% on a withdrawal anyway?!?

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TBH if your gains are looking anything like mine, what's 20% on a withdrawal anyway?!?

True. Like thatgermandude mentioned above - the perspective shifts a lot once it's no longer fun and games but you actually rely on these funds to pay the bills. Ultimately, even after potential taxes, the earnings are still excellent, I really just don't like sharing them with the state ;-)

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I know what you mean, but I personally can't complain too much - the State paid my wages for 20 years!

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I mean I'm not really complaining either, in the end, I'm happy to live where and when I do. But I wouldn't be a proper German without at least rambling a bit about taxes ;-)

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This was a really good read ! Indeed enlightening, Talk about effective systems,the Nigerian government has a effing long way to go , they aren't even taxing crypto, they banned it ! At least you know you've to leave your crypto a year for it to be tax free, here no such trades, but Nigerians, the doggedness, a way West find..
Good stuff and cheers !

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I really need to get more familiar with tax law. I am a college student and my income is relatively low, so I never really think about the taxation behind crypto. I think that over the next few years as I start to grow a bit I will need to be more keen to the tax laws. When I read you pay 42% I was SHOCKED! Can't understand how we are allowing governments to do this.

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hey your post is very good, it amazes me a lot is your salary with deductions with a month's salary I buy a house here in Venezuela hahahahahahaha my salary is $ 0.70 and well Hive and leofinance with cryptocurrencies is what we have managed to survive this year and well if I think it is the best alternative for here so far have not placed any I read by the trade of cryptoassets and if we placed laws like your country would be even more difficult situation

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