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Tax Law (Questions About Taxes)/Questions on leasing a company car

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QUESTION: 1. If an S-Corp leases a car and uses it for business 100% of the time, can it write off 100% of the monthly lease payments?

2. Can it write off the leased car's down payment?

3. Can it write off the cost of the car's insurance and gas?

ANSWER: Mike,

Thanks for your question.

No, leased vehicles are subject to the same limitations as an owned vehicle, only a little more complicated.  Basically, the amount of lease payments and down payments is limited.

Lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicle's business use. However, lessees must include a certain amount in income during the year the vehicle is leased to partially offset the amounts by which lease payments exceed the luxury auto limits. Rev. Proc. 2012-23 includes tables that identify the income exclusion amounts for passenger automobiles, trucks and vans with lease terms beginning in calendar year 2012.

Insurance and gas would be deductible in addition to the allowable portion of the lease payments.

Hope this helps.

John Stancil, CPA



---------- FOLLOW-UP ----------

QUESTION: Just for clarification, does that mean if you factor in the income inclusion amounts, the remaining monthly lease payments can be 100% deducted as business expenses (written-off)?

And is it true the down payment on a leased car can be written off via straight-line method over the length of the lease?  For instance, a $6,000 down payment on a 3-year lease can be written off $2,000 each year (for 3-years)?

Answer
That is correct on the first question.

The down payment is spread over the term of the lease, but is subject to the luxury car limitations and is included as a lease payment in determining the inclusion amount.

Bottom line, unless the vehicle is over 6,000 pounds you can't get around the luxury car limitations that you are trying to avoid.

John Stancil, CPA

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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