Can lease payments be deducted from taxes?? Yes, at least in the case of so-called commercial leasing. What you need to consider, we explain to you here.
The word leasing comes from the english and means nothing other than "renting. With car leasing, you rent a car instead of buying it.
Here’s how it works in a nutshell: you sign a leasing contract with a lessor and agree on a monthly leasing rate for a fixed period of time. The leasing rate depends on the make, model, equipment and new price. With some providers, a down payment of up to ten percent of the purchase price may also be due. There are three common types of car leasing contracts: mileage leasing, residual value leasing and zero leasing. If you have concluded a leasing contract, it is generally not possible to terminate it prematurely.
the lessor usually remains the owner and therefore also keeps the registration certificate part II, the vehicle registration certificate. As the lessee, you receive the vehicle registration certificate and are responsible for the car – including maintenance, tire changes, repairs, insurance and vehicle tax.
By the way:
leasing has a crucial difference to car financing: you have to return the vehicle to the lessor at the end of the contract period. Because the monthly payments are merely a usage fee, not a repayment. If you wish to keep the vehicle after the end of the contract period, you must conclude a leasing contract with an option to buy.
leased car not deductible as a private individual
If you lease a car for purely private purposes, you cannot deduct the monthly leasing installments from your taxes. car leasing is your private pleasure. our article car liability, insurance, travel expenses: deducting car expenses shows you which car-related costs you can deduct from your taxes.
By the way:
More than one in four lessees opted for an e-drive model in 2020, compared with one in fifteen in 2019.
Commercial leasing is tax deductible
The leasing share of new registrations in 2019 was around 40 percent. This is what the Federal Association of German Leasing Companies has determined. Commercial customers make up a large proportion of these customers and generally prefer mid-range and luxury vehicles.
The tax advantage for companies, professionals and freelancers: if the car is used for business purposes, the monthly leasing rate counts as a business expense. Special payments can also be claimed against tax. It is important for the tax office that you are not the beneficial owner, but the lessee. Therefore, the lease agreement is also an important document when it comes to deducting lease payments.
If you use the car exclusively for business purposes, you can claim the leasing rate and special payments in full.
Private use must be taxed even with car leasing
As with company cars, the following also applies to car leasing: if the car is used not only for business purposes but also for private purposes, the private portion is a non-cash benefit and counts as business income. You have two options for determining private use:
- Either you meticulously keep a log book or
- You use the 1 percent rule, i.e. you pay a flat rate of tax of one percent of the gross list price.
If the leased vehicle is a utility vehicle such as an excavator, a tractor or a road roller, the question of private use does not arise.
By the way:
Financially it pays to think about leasing an electric car. For electric vehicles purchased between 01.01.2019 and the 31.12.If the vehicle is purchased, leased or leased out for the first time in 2030, only half the gross list price is used in the calculation. This tax benefit is taken into account for both the 1 percent rule and the logbook. And had the "pure" electric vehicle with a gross list price below 60 % at the time of new registration.000 euro it can be even cheaper. read more in our article on the topic of electric car and tax.
Advantages of commercial car leasing
It depends on the individual situation whether and in what form company leasing is worthwhile for you. As a rule, a commercial lease offers the following advantages, among others:
- you do not have to take out a loan to finance a company car, the equity also remains unaffected.
- Thanks to fixed monthly rates you have planning security.
- You can deduct both the monthly installments and the special payments directly from your taxes, if applicable.
- The sales tax incurred can be claimed as input tax.
As an association for wage tax assistance, VLH is permitted under § 4 nr. 11 stberg not allowed to advise self-employed and freelancers. If you have any questions about the tax benefits of car leasing, please consult a tax advisor.