I own my own business -- I am a Mary Kay Consultant. I spend a lot of time traveling by car to visit my customers. If I lease a new car, can I deduct my lease payments as a business expense?
Won't it be hard to find a pink car to lease? But seriously, if you do opt to lease, you can deduct the business use portion of your lease payments as a business expense. You'll need to keep a detailed log showing how much you use your car for business, as compared to personal use.
Taxwise, life becomes a bit more complicated with leasing, but it's usually worth the effort. For instance, you have to spread any advance payments out over the entire lease period. You can't deduct payments to buy the car, even if they're called lease payments. And, depending on the value of the car you lease, you may have to reduce your lease payment deduction by a small amount each year of the inclusion amount. You can ask your tax preparer how much the inclusion amount will be or see IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
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