Topic 09 · 5 min read
The Truth About Deducting Lease Payments
Yes, you can deduct the lease — but only the business part.
Leasing a vehicle for business does produce a deduction, but not the whole payment and not automatically. The deduction tracks the share of miles driven for business, and luxury vehicles face an extra adjustment designed to level the field with buyers.
What to know
- Business percentage rules everything
- Drive 70% for business and 70% of the lease payment is deductible. Commuting from home to a regular workplace is personal mileage.
- The lease inclusion amount
- For higher-value vehicles, a small amount is added back to income each year so lessees do not beat the depreciation caps that apply to owners.
- Lease versus actual expenses versus mileage
- With a lease you may use the standard mileage rate or actual costs — but the choice made in the first year generally governs the whole lease.
- Heavy vehicles change the math
- Vehicles over the weight threshold escape the passenger-auto caps, which is why purchase, not lease, is often the better move for them.
- Logs are the deduction
- Date, mileage, and purpose for each trip. Without a contemporaneous log, the percentage is not defensible.
The tax benefit
The business portion of lease payments, insurance, fuel, and maintenance reduces business income every year with no depreciation schedule to track.
Worked example
A $700 monthly lease
At 70% business use, $490 a month — $5,880 a year — is deductible, reduced slightly by any lease inclusion amount for a higher-value car.
Watch out for
- Claiming 100% business use on the only vehicle in the household rarely survives scrutiny.
- Reimbursement from an employer means no personal deduction for the same miles.
- Switching between mileage and actual methods mid-lease is restricted.
Terms from this topic
Business use percentageLease inclusion amountStandard mileage rateMileage log
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