Can I Write Off My Car Lease?
You will be happy to know that you can write off your car lease if you use the vehicle for business. You will definitely be able to deduct the expenses you had to cover because of using the leased car for your job even if you also use it to run personal errands. You can separate the two aspects and benefit from the deductible as long as you have an idea of the IRS’s guidelines.
One category of costs you can deduct is represented by the actual costs. These costs are usually due to gas and repair bills, but also include the monthly lease payment. The amount deductible is usually expressed in percentages of the total cost involved and it depends on how often you use the car for business purposes. For example, if 40% of the times you use the leased car for activities related to a business, then you will be able to deduct 40% of the money you spend on a monthly basis.
To determine the amount you can claim through the actual costs method you will need to apply a simple formula. You will first of all need to divide the business miles by the total number of miles that you’ve driven during a month and then multiply the result by the added costs involved by the necessary gas, the car’s maintenance, the mandatory insurance and the lease payments and add the maximum depreciation.
Another cost you can choose to deduct is the cost expressed per mile. There is usually set a maximum amount per mile the IRS allows those who use leased car to deduct. So, the only thing you will have to do is prove how many miles you have driven for business purposes and by multiplying the number of miles with the deduction allowed per mile you will be able to determine what amount you should claim. In addition, if every month you drive the same number of miles for business purposes because you need to visit certain clients or because you travel each month on a certain route, you can prove a pattern that will make it easier for you to make the necessary claims. It’s harder to keep track on paper of the miles you drive per day or per week every month. The first option is more recommended especially if you can prove to the IRS that you respect a strict schedule every month. You should also keep in mind that the deductible per mile doesn’t take into consideration the car’s depreciation, the monthly lease payments you need to cover and other expenses such as the gas bills.
If you are interested in deducting expenses involved by qualified travels, then you should know that the IRS doesn’t consider all these travels eligible for deductions. For example, you can’t write off the money you spend each month for getting from home to your workplace even if the distance is longer and you carry some work related equipment as well. The trips that are related to your job and are deductible are those between your residence, and, for example, the location of a client or of a site that you are required to visit as part of your job.
You can write off your car lease, but the process is difficult and worth considering only if you work in a field that involves a high-mileage per month (for example a real estate agency). What’s important is that you have solutions from which to choose, especially if you run a small business for which these deductions would have a huge positive impact.
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