Capitalization of German words in English sentences

You do not need to capitalize nouns unless they're proper (or at the beginning of a sentence).

Particularly if your audience is made of English speakers who aren't expected to have knowledge of German vocabulary or grammar, the capitalization of an ordinary noun may cause confusion.

It's a good general practice to italicize foreign words that haven't become an accepted part of the English language yet, though.

In my opinion, if the words are in regular use in English (e.g. zeitgeist, doppelgänger), the words should not be capitalized. If the words are not in use in English I would suggest using capitalization for nouns and italicising the words.

It's a tough one. I'd say the question is whether you are using an English or a German word. For example, "schadenfreude" is an English word borrowed from the German language (and "Schadenfreude" is a German word). But if I told you that you have to pay 20% Mehrwertsteuer on goods bought in a shop in Germany (which I wouldn't want to translate to "sales tax" or "VAT" because I know it is very similar but possibly not exactly the same, and some Germans wouldn't translate because they don't happen to know the English word), then I'd write it capitalised. It's a German word, not a loan word, in the middle of an English sentence.

It's of course not proper English; it's a sentence mixed of English with a bit of German.