Leases and taxes

[TheVazha]

Hi All,

Let me start by saying I am embarrassingly inept when it comes to taxes and creativity. I read the M5/X5M forums on "current lease rates" and it may as well be written in a foreign language.

I have a basic question. I read that if you lease a vehicle for work, you can use the lease payments as a deduction. There are two ways to do it, standard mileage or actual expenses. I read up on both so that's straight forward.

What I don't quite understand, assuming you use the actual expenses method, does that mean that you can just reduce the amount of taxes you owe, or the amount you are taxed on?

As in, if you make $500K/year, and say you owe $150K. Your yearly lease is 18K. Do you subtract the $18K from the $150 you owe, or do you subtract the $18K from the $500K you made and are only taxed on the $482,000?

Is there another legal creative way to get more out of leases? I've been buying all my cars from the start, but thank the Lord I have a ton of taxes to pay and taking advantage of lease deductions may help a ton. I typically lose about $30,000 over the course of ownership, or about $833/mo. A lease payment on the same vehicle (but brand new) is about $1500/mo. For example, I bought my X5M for about $70, and next year when I sell I'll probably get $40. Total cost of ownership was $30, plus brakes, plus oil changes, plus etc etc. All that stuff is covered in the lease, but the lease is twice as much (broken down monthly).

TIA. I'd ask my accountant but he eats crayons.

[upstatedoc]

Do I need to break out my Clark Howard YouTube videos?

[TheVazha]

Originally Posted by upstatedoc

Do I need to break out my Clark Howard YouTube videos?

Omg I just looked him up. Sub'd to the podcast. Thank you saint.

[shoei]

Originally Posted by upstatedoc

Do I need to break out my Clark Howard YouTube videos?

He solved his own issue without realizing it.

His numbers guy eats crayons. Mine eats molten lava. That's what I need with my numbers guy, a no nonsense tell it like it is hardhitting crayon THROWING accountant from NYC.

You can marry someone who eats crayons if you wish, I mean some guys like that trophy wife shit. But never, and I mean NEVER have an accountant or bookkeeper or attorney who eats crayons. Period.

[RickFLM4]

Deduction not a tax credit - reduces taxable income.

[MsGoGoMoto]

I need to watch this post closely to learn

I suck at taxes

[2000cs]

See the Transportation section: https://www.irs.gov/publications/p463

This is the personal income tax deduction for business use of vehicles. If you have the opportunity to deduct from a business income tax return, you should evaluate that as well to see which is better, then structure the lease/ownership of the vehicle accordingly.

Note that you cannot deduct commuting expenses, generally. There are some exceptions and rules you’ll have to follow to qualify for that.