Business Car Lease
Many entrepreneurs out there take a business car lease in order to benefit from significant tax breaks. Leasing a car for business purposes is not much different in comparison to leasing one for personal needs.
Before you head out to lease a new car, we advise you to do a little bit of research and don’t make any rash decisions. Have a look on websites like Edmunds.com as well as manufacturer’s websites in order to find out the latest least promotions and car features. Get in touch with the dealership by sending an e-mail asking them about the inventory and a quote for a certain model. Once you have established the car that you want, get as many price quotes as you can from the local dealerships and learn more about their current inventory.
After you have picked out the car that you want to buy, it is time to do some business. The leasing firm might require personal credit guarantees depending upon the size of the business, but make certain that you title the car to the business. Get in touch with your accountant to write off part of the lease payment. A percentage of the business lease can be tax-deductible.
You should write down how much time you spend driving the car as you will need to be able to confirm to the IRS of the percentage of time you spend driving the vehicle for business purposes, and by getting as close as possible to the exact percentage, the more accurate you will be, meaning that you will benefit from a greater tax deduction for the business car lease. Put down in writing all of the time you spend in the vehicle and make a succinct note of what the general purpose of the trip was. Driving to and from work is a business-related trip so you must write it down. We know that this may sound a little bit inconvenient, but if you want to save more money, this is a great way to do it.
For getting a deduction, you will have to calculate the total amount of cash you have paid to the leasing firm over the tax year. Usually, it will be your monthly lease payment divided by 12, although there are some lease agreements in which the monthly payments vary.
To find out how much you can deduct, multiply the percentage (in decimal form) by the total amount of cash you have spent on your yearly car lease payments. The result will be the total amount that you will be able to deduct from the car’s cost. In addition, you also have the possibility to deduct a part of the money that you paid for maintaining the vehicle, along with other miscellaneous expenditures, like the cost of gasoline, insurance, and any other repairs you had to make in the past tax year.
If you have a more expensive car, you may have to deal with the lease inclusion amount. This will limit the amount of money that can be deducted – you can get more info about this through the IRS.
Source: Edmunds.com, IRS
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Post tags: Tags: automotive articles, business car lease, leasing a car