Is It Possible to Get a Car Lease Tax Deduction?
If you want to lease a car for business purposes, it works to your advantage to check whether you can get a car lease tax deduction when filing your returns. It's possible to save a considerable sum of money by writing off a percentage of your monthly lease payments as a tax deduction. The depreciation of your leased business vehicle is a deductible on your annual tax form. However, you should follow a few guidelines and do your calculations carefully.
Getting Auto Lease Tax Deductions
If you want to benefit from car lease tax deductions, the law requires that the car be used (in part) for business purposes. In general, the total amount paid on the lease in a year and the cost of gas and maintenance are deductible, but it's best to take advice from a tax specialist to calculate the exact amount. If the car is used for both business and personal purposes, a percentage of the total lease expense is deductible. If the car is used for business purposes for half the time it's driven, 50 percent of the total lease expense plus 50 percent of the gas and maintenance costs can be deducted. It's also essential that you keep a detailed and accurate time log of 'business car use' as you would be required to submit this with your tax form.
There is another factor known as the Lease Inclusion Amount that you must consider. A fee is charged on cars that cost over a certain amount. This reduces the amount of deductible lease expense. A tax specialist can advise you on how to calculate this amount. Tax deductions work best for cars with high monthly payments. The more expensive the leased car, the greater the tax savings. When you lease a car, the interest is included in your monthly payment and becomes tax deductible. However, the interest charged on a car loan is not tax deductible.
Leasing a car is more advantageous than purchasing one when it comes to taxes, and it's worth the time and effort to research the tax benefits of leasing before you get a business car lease.