Is vehicle breakdown cover tax-deductible: How to save tax
18.04.25
6
Minutes
Katrin Straub
Managing Director at nextsure
Many drivers ask themselves: Is my vehicle assistance cover tax-deductible? The answer is not always straightforward, because it depends on your professional situation and how the vehicle is used. Find out here under which conditions you can save up to one hundred per cent of the costs.
The topic in brief and concise terms
A vehicle breakdown cover policy is generally not tax-deductible for private individuals, as it is not considered essential for everyday life.
Employees can claim part of the costs for car breakdown cover as work-related expenses if they use their private vehicle for work and can provide evidence of this.
Self-employed people can usually deduct the premiums for vehicle breakdown cover in full as business expenses if the vehicle belongs to the business assets.
Basics: What is vehicle breakdown cover and why the tax issue matters
A car breakdown cover protects you in the event of breakdowns, accidents or theft, often with benefits such as roadside assistance or vehicle recovery. These costs usually range between €30 and €120 per year. Given these annual expenses for many of the more than 48 million passenger cars in Germany, the question of tax deductibility arises. An accurate declaration can reduce your tax burden by a few euros. The distinction between private and business use is key here.
The tax treatment of insurance costs is a complex area. Specific rules apply to car breakdown cover, which differ from car liability insurance. While liability cover is often recognised as a provision expense, this is not always the case with breakdown cover. This section lays the foundation for understanding its tax relevance.
Quick Facts: Vehicle breakdown cover and tax – the essentials at a glance
The tax deductibility of your car breakdown cover depends on several factors. Here are the key points summarised in three points:
Private users: As a rule, car breakdown cover is not deductible as special expenses when the vehicle is used purely for private purposes. The tax office does not regard it as essential provision.
Employees with work-related use: If you use your private vehicle for work, you can often claim the costs of the cover proportionately as work-related expenses. This applies, for example, to journeys to changing work locations that go beyond the mileage allowance of €0.30 per kilometre (€0.38 from the 21st kilometre).
Self-employed and business owners: If the vehicle is part of business assets, the premiums for car breakdown cover are generally fully deductible as business expenses. This directly reduces the taxable profit.
These distinctions are crucial for the correct declaration in your tax return. The following sections explain these points in more detail.
Practical check: When is breakdown cover tax-deductible?
For private individuals and employees: private use
For most of the around 41 million employees in Germany who use their vehicle exclusively for private purposes, there is a clear answer: car assistance cover is not deductible as a special expense (provision expense). The tax office only recognises insurance policies that serve the direct safeguarding of existence. The maximum amount for other provision expenses is EUR 1,900 for employees and is often already used up by contributions to health and long-term care insurance. An assistance policy for the family car, which is used only for shopping and holiday trips, usually does not fall within this category.
For employees: business trips with a private car
The situation is different if, as an employee, you use your private vehicle for business purposes. This can include, for example, journeys to customers, to different branches, or as part of a changing place of work assignment. In such cases, you can claim the costs for car assistance cover pro rata as work-related expenses in Appendix N of your tax return. The decisive factor is the proportion of business use, which you can prove, for example, using a logbook or a plausible estimate (based on kilometres driven). If the business proportion is 40 per cent, for example, you can claim 40 per cent of the assistance cover costs. This rule applies if the travel costs are not reimbursed by the employer at a flat rate.
For the self-employed and business owners: the assistance policy as a business expense
For the more than four million self-employed people in Germany, the situation is often more favourable. If the vehicle used demonstrably belongs to the business assets (used for business purposes by more than ten per cent), the costs for car assistance cover are fully deductible as business expenses. This applies regardless of whether it is a car, van or another vehicle used for business purposes. The expenses reduce the profit and therefore the tax burden. The entry is made in Appendix EÜR (income surplus calculation) or in the profit and loss statement (P&L). An foreign car assistance cover for business trips is also deductible here.
Calculation examples and supporting documents: How to claim your cover
Example calculation for employees
Ms Müller is an employed field sales representative and uses her private vehicle for customer visits. Her car breakdown cover costs 75 euros per year. She drives a total of 20,000 kilometres per year, 8,000 kilometres of which are for work. The proportion of business use is therefore 40 per cent (8,000 km / 20,000 km). She can claim 40 per cent of 75 euros, i.e. 30 euros, as income-related expenses. She enters this amount in Schedule N. It is important that these journeys are not already covered by the commuting allowance to the first place of work.
Example calculation for self-employed persons
Mr Weber is a self-employed tradesman. His van is part of the business assets to the full extent. The car breakdown cover for the van costs 110 euros a year. Mr Weber can claim the full 110 euros as a business expense in his Schedule EÜR. This reduces his taxable profit directly by this amount. An breakdown assistance insurance for Europe would also be deductible if he operates across Europe.
Important documents for the tax office
The tax office requires evidence of the claimed costs where necessary. Therefore, keep the following documents ready:
The insurer’s invoice for the car breakdown cover (often part of the car insurance invoice).
Proof of payment (e.g. bank statement).
For employees with business use: evidence of the proportion of business use (e.g. mileage log, travel expense statements, record of business kilometres driven). A mileage log is the safest method here and can often be purchased for less than 20 euros.
For self-employed persons: proof that the vehicle belongs to the business assets.
You do not have to submit these documents directly with your tax return, but you should be able to produce them on request. The retention period is generally ten years.
Expert depth: tax forms and legal basics
Where do I enter vehicle assistance cover in my tax return?
The correct placement in the tax forms is crucial. For employees who claim the cover proportionally as employment expenses, Annex N is relevant, usually under “Other employment expenses” (e.g. lines 45-48, depending on the current form). Self-employed individuals enter the costs as business expenses in the Annex EÜR (income surplus calculation) under “Motor vehicle costs and other travel costs” (e.g. line 59 or similar for insurance) or in their profit and loss account (P&L). Private deductibility as special expenses in the pension-related expenses annex is usually not available for the cover, as mentioned. You can also find information on entering insurance policies in our blog.
Our expert tip: maximum limits and other deductible insurance policies
Please note the maximum amounts for pension-related expenses: 1,900 euros for employees and 2,800 euros for the self-employed (for their private insurance contributions). These sums are often already reached through health and long-term care insurance contributions. So check carefully whether any additional entries would actually have a tax effect. The position is different for employment expenses and business expenses; there are no such flat caps for the cover. Also think about other insurance and tax matters, such as motor third-party liability insurance (always deductible) or, in some circumstances, vehicle repatriation insurance, if this was taken out separately and is work-related.
Legal classification: why the tax office makes a distinction
The different treatment is based on the Income Tax Act (EStG). Special expenses (§ 10 EStG) include private pension-related expenses that serve personal protection. Employment expenses (§ 9 EStG) are costs incurred to generate, secure and preserve an employee’s income. Business expenses (§ 4 Abs. 4 EStG) are costs incurred by a self-employed person in connection with their business. As the cover primarily serves to protect the vehicle and not direct personal provision, it usually does not fall under § 10 EStG when used privately. However, if it is required for work, it may fall under § 9 or § 4 Abs. 4 EStG.
Conclusion and recommendation: using vehicle breakdown cover for tax purposes
The ability to deduct the cost of a motor vehicle breakdown cover policy for tax purposes depends greatly on your individual circumstances. While private users usually come away empty-handed, employees who use their vehicle for work and, in particular, self-employed people can often benefit. A precise review of business mileage and proper documentation are crucial here. Even at a cost of €80 for the breakdown cover and a tax rate of 30 per cent, the saving can amount to €24 if fully deductible. Compare this with the small additional cost of breakdown cover on top of your motor insurance. It is worth examining your own circumstances carefully and making full use of the options available.
If you are unsure whether and how you can claim your motor vehicle breakdown cover or other insurance policies as a tax deduction, we recommend individual advice. Our experts at nextsure will be happy to help you analyse your insurance situation and identify potential for optimisation. This ensures that you do not leave any saving opportunities unused and that your insurance cover is set up optimally.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
The Federal Ministry of Finance provides detailed information on income tax and deduction options for employment expenses.
The Laws on the Internet portal provides the full text of the Income Tax Act (EStG), the legal basis for the taxation of income.
Haufe provides a comprehensive overview of the tax deductibility of vehicle costs, relevant for employees and self-employed people.
FAQ
Is my car breakdown cover automatically tax-deductible if I’m self-employed?
Not automatically. The vehicle must belong to the business assets and the costs must be incurred for business purposes. Purely private use of a business vehicle excludes the deduction or requires an adjustment for the private element.
I only use my car for commuting to work. Is the breakdown cover then tax-deductible?
No, journeys to the first place of work are covered by the mileage allowance. This also covers such incidental costs. The breakdown cover is not additionally deductible here as work-related expenses.
What is the difference between income-related expenses and special expenses for breakdown cover?
Income-related expenses are work-related expenses incurred by employees (e.g. the portion of breakdown cover for business trips). Special expenses are private provision expenses (as a rule, breakdown cover for private use does not fall under this).
My breakdown cover is included in the car insurance invoice. How do I prove the costs?
The total invoice serves as proof. Ideally, the costs for the breakdown cover are shown separately. If this is not the case, confirmation from the insurer of the relevant portion can be helpful.
Can I also claim the breakdown cover for a motorbike or motorhome as a tax deduction?
Yes, the rules are the same as for passenger cars. The decisive factor is business use or inclusion in business assets.
Is it worth the effort to deduct the breakdown cover, given the low cost?
This depends on your marginal tax rate and the amount of deductible expenses. If used for work or if you are self-employed, even smaller amounts can add up. A careful review is advisable.
