Private Costs with Company Car – deductible with “1% method”

Having a car from one’s employer also for private use, can you deduct single privately borne car costs when using the logbook method? The Federal Tax Court gave an answer in its judgment of October 18, 2007, re VI R 57/06.

An employee paid for some fuel for his employer’s car and wanted to deduct this amount from his taxes. He determined the private costs of the car implementing the 1% rule to be taxed as an income. The employee agreed with his boss in April that the labor contract was to end in December with leave of absence. Following this agreement, he carried the costs for the car (leasing rates, washes, fuel, and insurance. The employer deducted these costs as work-related expenses. The tax office refused to accept these costs. The same goes for the lower instances in court.

The BFH ruled that such costs are generally deductible. However, this will only be applicable for persons evaluating the private car costs via the logbook method. Generally, you can determine the private share of the costs with either of the two legal methods.

Following ruling case law interpreting §8 II 4 EStG, also such costs determine the private worth of the car that the employee bears himself in terms of §9 I 1 EStG. Therefore, such individual costs cannot be considered when using the flat 1% method. Only when individually determining one’s costs can all car costs be determined.

Hint:

You can change the method for determining the private car costs annually. This means you will have to keep a logbook and save all personally reimbursed costs so that you can determine at the end of the year which method will be more favorable for you.

Published on the old CMS: 2008/4/1
Read on the old CMS till November 2008: 1.855 reads