Can your private car be claimed as a business expense? That depends on whether it is assigned to your private assets or business assets.

Determining the scope of how often you use your car for business purposes

In order to determine the extent of the business use of your car, we recommend that you keep a log of all your journeys for a period of three months. These records can be made informally and are then valid beyond the three-month period. If anything significant changes, such as a change of vehicle, you should make these records again.

Operational use of less than 10%

If you use your car less than 10% for business purposes, you cannot claim the actual costs as business expenses. In this case, however, you still have the option of claiming your actual mileage as a business expense at a flat rate of 30 cents per kilometer. Please find more information here.

Journeys between your home and your workplace with your private car can be recognized as a business expense at the rate of €0.30 per kilometer driven one-way or €0.35 from the 21st kilometer onwards.

The mileage allowance covers all costs of the car, such as petrol, vehicle tax, insurance and maintenance. Please find more information here.

Operational use between 10% and 50%

If you use your car for business purposes between 10% and 50% of the time, you can decide whether you want to keep it assigned to your private or business assets. In the case of business assets, you can deduct all business expenses. However, a logbook must be kept to distinguish it from private use. At the same time, the 1% rule cannot be applied.

If your car is used more than 50 % for business purposes, it is automatically assigned to your business assets. In principle, all business expenses are fully deductible. For private use, the 1% rule or alternatively the logbook method must be used. In the case of high business use, the logbook method may prove to be more advantageous for tax purposes than the 1 percent rule. However, since it involves more bureaucratic effort due to the precise documentation required, the simpler 1 percent rule can also be used at any time.

If you use your car exclusively for business purposes, it is automatically attributed to your business assets.

All business expenses for the car can be claimed in full and the VAT included in these expenses is also fully deductible as input tax.

In this case, private use does not have to be made, as the car is used exclusively for business purposes. The 1-percent method and logbook are therefore not necessary.

Note, however, that 100% business use can only be assumed in certain cases. For example, a van with a closed, windowless cargo area.

If your car is part of your business assets, you have to pay tax on the (proportional) private use of your car. One of two possible approaches is used for this.

The 1% rule is used for business use of more than 50%. When applying this method, all expenses for your car are recognized as business expenses.

In return, the private use of your car is taxed at a flat rate of one percent of the gross list price (in the year the car was built) per month. In addition, journeys between home and workplace are taxed at 0.03% of the gross list price per month. Of this, however, €0.30 per kilometer of one-way travel (€0.35 from the 21st kilometer onwards) can be deducted as business expenses per working day.

This method mainly offers the advantage of a non-bureaucratic, flat-rate calculation. Especially if you use your car frequently for private trips, the 1 percent rule is less complicated than having to keep a logbook.

By keeping a logbook, you can determine the exact share of your private use of the car. You can use this method for both your private and business assets.

First, the share of all your private journeys must be calculated from your logbook. This private share is then multiplied by the total costs incurred, and the result is a profit-increasing operating income.

The effort of keeping a logbook is usually worthwhile if you drive almost exclusively for business purposes, if your car is already depreciated or has a high gross list price. There are strict requirements for keeping a logbook. Each entry must include the following:

There are numerous providers of electronic logbooks that document the data via a smartphone app using GPS data and make it easy to manage.

There are additional tax advantages for the private use of electric vehicles as business assets. When calculating the private use share using the 1% rule - which increases profits - only a share, not the full gross list price, needs to be used as the basis for calculation.

Simply put, the 1% rule becomes the 0.1% rule or 0.5 for hybrids, which reduces the tax burden.

If a logbook is kept, only half or a quarter of the costs are used to calculate private use.

However, the taxation of journeys between home and workplace is not influenced by the type of car.

In the case of hybrid electric vehicles, the year of purchase and the size of the installed battery determine whether there are advantages when calculating private use. With restrictions, a reduction similar to that for purely electric vehicles is also possible in these cases.

Whether leasing installments can be directly deducted as business expenses depends on whether a leased car is to be capitalized as business assets by the lessee or the lessor. This is regularly decided according to the provisions of the so-called leasing decree of the Federal Ministry of Finance.

In most cases, however, a leased car does not belong to the business assets of the lessee, which means that it is not included in the fixed assets.

However, if the car is used for business journeys, the leasing installments can be recorded as business expenses.

The 1 percent rule or the logbook method for taxing private use must also be applied to a leased car. The advantages for electric and hybrid electric vehicles also apply.