Since the 11th century the indulgence developed gradually into an ecclesiastical practice by which it was possible to remove or to decrease the punishment of sin in purgatory. This only applies to temporal punishment, not to eternal punishment.
For the contemporaries of Luther two main points counted concerning indulgences:
- Those who have a complete indulgence do not have to go to the purgatory but go directly in heaven;
- A soul that expiates punishment for sin in purgatory can go to heaven directly, with the help of a complete indulgence, acquired for him or her.
The indulgence seemed dubious and dangerous to the young Luther, especially against the backdrop of his expiational theology. The indulgence campaigns were fed especially by the financial interests of the church. The result of this was that Luther asked the question as to what indulgences are and what their effect is. In 1517 he discussed indulgences in a treatise, and in his 95 theses. He called upon the archbishop of Mainz to take rescind the indulgence order. He also invites, with his 95 theses, his colleagues to discuss indulgences. In 1517 he does not completely reject indulgences.
Luther combined guilt and sin, insisting that they are forgiven in the Sacrament of Penance, along with punishment for sin. According to Luther, indulgences concern only the latter. Luther distinguishes between punishments that can be imposed by the pope and punishments that are imposed by God. Not every sin demands temporal punishment, according to Luther. Furthermore, Luther notes that when God imposes certain punishments, the pope can not cancel them. He can do this only concerning punishments originating with the priest.
For Luther confession is not only about the guilt and the punishment of sin, but also about the striving and the desiring of the people. People sin when they do not love God with their whole heart and then they find it impossible to do the good. It is better to destroy sin through confession. Therefore, a man has to take an attitude by which he does not look within himself for absolution. The suffering and the punishment that happen to people are intended to force them to rely upon themselves less. For someone who repents, the indulgence does not make sense anymore because God works remorse in him, no penalty is needed any longer.
In 1517, Luther believes purgatory to be a condition wherein the love of God is absent. In earthly life the love to God is lacking and in its place there is love of the world. Liberation from purgatory comes through an increase in God’s love. This is a gracious gift of God. An indulgence for a dead person can only make sense as a prayer to God for the dead. The family of the dead do not have to pay the church for this prayer. Ultimately, though, Luther rejects both indulgences and purgatory.
- Traktat über die Ablasse  (WA.B 12, 5-10);
- 95 Thesen -der Disputation zur Klärung der Kraft der Ablässe  (WA 1, 229-238).