The gross return on an investment does not take into account any costs, but the net return reflects the actual profit after deducting all costs and taxes caused by it. At the end of the year, what counts for an investor is the net return that he has achieved with his investments, whether through overnight money or through stock transactions.
- The net return of individual investment variants – savings deposits, securities, real estate rented out to third parties – is calculated differently.
- The net return depends on taxation and the cost of the investment. Even if an investor cannot change anything about taxation, he can very well influence the cost side.
- Families with children can optimize net returns by opening accounts in the names of the children.
Determination of the net return on savings deposits
There are no costs for opening, maintaining and closing a deposit account , be it a savings book, a fixed-term deposit account or a call money account . The only factor that negatively affects the net return is the taxation of income. For overnight money accounts, however, many banks reward the account opening with a bonus payment. If the bank makes a cash deposit on the newly opened account as a bonus, this deposit changes the net return positively when calculating the return, as the nominal interest initially only relates to the customer’s deposit.
Calculation example
An investor pays EUR 10,000 into a call money account at an interest rate of one percent pa for a period of one year. The bank honors the opening with a bonus of 30 euros. The return after one year is 130 euros, the actual return is 1.3 percent. See digopaul for meanings of return.
Determination of the net return on securities
If two investors buy and resell a stock on absolutely identical terms, they will achieve the same gross return, but not necessarily the same net return. The final withholding tax is the same for both. The costs can differ, however: one person has to pay a custody account administration fee to the bank, while the other’s account is managed free of charge. One bank can charge a brokerage fee that is percentage-based on the transaction volume, while the other bank can only charge a fixed brokerage fee that is independent of the volume. Both factors have a lasting effect on the net return. With a portfolio comparison , investors can optimize their net income decisively.
The same applies to the issue surcharge for investment funds. An investor who chooses an institution that discounts the front-end load inevitably achieves a higher net return than an investor who has to pay the premium in full. The shorter the holding period, the clearer the difference becomes.
The determination of the net return in the case of third-party letting
For landlords too, at the end of the year it is the net return on their rented apartment that makes the difference. The rental income is not only offset by costs, but must also be supplemented by possible tax advantages. First of all, the rental income is reduced by the non-apportionable ancillary costs. In addition, interest and repayments are incurred on a real estate loan. On the other hand, the interest, the depreciation on the property and the non-apportionable ancillary costs can be claimed in the tax return to reduce taxes. The net return on renting out to third parties also includes the tax advantage, which would not come into effect without the apartment.
Closed-end fund net return
The same applies to investing in a closed fund, be it a real estate fund or a ship fund. In addition to the annual return, which results from the distributions and the tax advantages, the sales proceeds, taking into account the taxes due, also flow into the overall assessment of a closed fund.
Taxation on the net return
As mentioned at the beginning, no investor can change anything in terms of taxation. However, if you submit an exemption application, you will receive the first 801 euros as a single person and the first 1,602 euros of your investment income as a married person. Families with children can increase the net return even further. Since every German citizen is subject to tax, he is also entitled to the tax exemption on the other hand. If parents open accounts in the names of the children, they can also apply for exemption. This increases the net return on the investments of the whole family again.
