For some freelancers and self-employed, it can make sense not to buy a car, but to take out a subscription. We explain when it counts as a business expense and how to calculate the usage benefit.
If freelancers or self-employed people opt for a car subscription – i.e. a fixed monthly rate for use, maintenance and insurance – they also have to think about the tax.
Just like when buying a car or leasing a vehicle, two points must be taken into account: the operational level and private use. If the vehicle is used at least 10 percent for business purposes, the monthly subscription rate can be deducted as a business expense.
Income tax is due for private use
“In the end it is the same as renting an office,” summarizes Isabel Klocke from the taxpayers’ association. If the vehicle is also used privately, income tax is due on this benefit.
The benefit is calculated either as a lump sum with the so-called 1 percent rule or precisely with a logbook. The general 1 percent rule can be used if at least 50 percent of the vehicle is used for business purposes. The benchmark is then the gross list price of the vehicle. “If you want to save here, you should make sure that you don’t choose a very expensive vehicle,” says Klocke.
When is a logbook worthwhile?
In addition, journeys between home and company or journeys to the second home at the place of employment are billed. If you want to make a very precise billing of private trips instead, you have to keep a logbook.
“This is time-consuming, but it is especially worthwhile if the vehicle is rarely driven privately,” says Klocke. If the car is used for business less than 50 percent, the private use advantage must be determined by an estimate or a logbook.
A car subscription can be worthwhile, especially for freelancers with shorter projects that sometimes require a vehicle and sometimes not, or switching to a larger or smaller car. However, the tax implications should not be neglected.