If you lease a car for your business, don't miss out on your deductions. Let's go over how you can take a car lease tax deduction.
If you lease a car that you use in your business, you can deduct your car expenses using the standard mileage rate or the actual expense method. If you use the standard mileage rate, you get to deduct 54.5 cents for every business mile you drove in 2018. You may also deduct parking and tolls. You can't deduct any portion of your lease payments if you use the standard mileage rate. To use the standard mileage rate, you must use it the first year you lease your car for business and all future years. Alternatively, you may deduct your expenses using the actual expense method. This¬†practice enables you to deduct the portion of each lease payment that reflects the business percentage use of the car. You cannot deduct any part of a lease payment that is for commuting or personal use of the vehicle.
For example, if you pay $400 per month to lease a car and use it 50% of the time for business, you may deduct half your lease payments ($200). Leasing companies typically require you to make an advance or down payment to lease a car. You can deduct this cost, but you must spread the deduction out equally over the entire lease period. You may also deduct your actual expenses for gas, repairs, license, insurance, and so forth.
Sometimes, leasing a car makes the most sense for your life and achieving the largest business deduction. Other times, you may want to purchase a vehicle. We've also seen situations where driving two cars for business can be better than just a single one.