# Can Someone Explain Tax Benefits For Business Leases? **URL:** \ **Category:** Off-Ramp\ **Created:** [February 11, 2021, 12:25am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120 "2021-02-11T00:25:04Z")\ **Posts on this page:** 14\ **Page:** 1
**Author:** ![RobC2](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/robc2/32/239969_2.png) [@RobC2](https://forum.leasehackr.com/u/RobC2)\ **Post date:** [February 11, 2021, 12:25am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/1 "2021-02-11T00:25:04Z")
Let me preface this by saying that I am pretty familiar with the tax code and IRS rules and I am also pretty familiar with how leases work. What I cannot understand is how some people think that because they are self employed or own a business, they are driving around in their leased BMW for free. Is it just shady accounting, or something more? Let’s throw some rough numbers at it and see where I am wrong. Assumptions: You lease a BMW 7 Series for $900 a month. Let’s say you are in a 33.3% tax bracket. Let’s also say you use your BMW for 1/3 business and 2/3 personal use. After all, unless you are in sales or using the car for advertising your BMW parts business (and even then I don’t see it being 100%) it will not be much more than that. First month of your business, you make $900. Your only expense is the BMW, which you can use to deduct $300, leaving you with $600 in taxable income. Your tax rate is 1/3 in both cases (to keep it simple). So your taxes without the BMW are $300 and you taxes with the BMW are $200. In short you are paying $900 a month to save $100 a month on taxes. So your BMW is now $800 a month if you prefer. Not a huge difference. What am I missing? ---
**Author:** ![mllcb42](https://leasehackr.b-cdn.net/letter_avatar/mllcb42/32/5_5575768a8748004e209b776fc1b2916d.png) [@mllcb42](https://forum.leasehackr.com/u/mllcb42)\ **Post date:** [February 11, 2021, 12:28am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/2 "2021-02-11T00:28:04Z")
> [@RobC2](#): > > What am I missing? Not much, sounds about right. People love to spend a dollar to save a penny. ---
**Author:** ![littleviolette](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/littleviolette/32/182_2.png) [@littleviolette](https://forum.leasehackr.com/u/littleviolette)\ **Post date:** [February 11, 2021, 12:31am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/3 "2021-02-11T00:31:00Z")
Are you comparing business lease to personal lease or to buying the car? ---
**Author:** ![john6866](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/john6866/32/21516_2.png) [@john6866](https://forum.leasehackr.com/u/john6866)\ **Post date:** [February 11, 2021, 12:31am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/4 "2021-02-11T00:31:32Z")
> [@RobC2](#): > > In short you are paying $900 a month to save $100 a month on taxes. So your BMW is now $800 a month if you prefer. Not a huge difference. What am I missing? I guess if I was planning to lease a 7 series anyway, and can also save $100 a month, then why not. But if someone got a 7 series just for the tax savings, then yeah I would agree with your assessment. I don’t have a business so I can’t comment on whether your numbers/assumptions are right/wrong. ---
**Author:** ![Kroos8](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/kroos8/32/70179_2.png) [@Kroos8](https://forum.leasehackr.com/u/Kroos8)\ **Post date:** [February 11, 2021, 12:34am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/5 "2021-02-11T00:34:35Z")
It doesn’t make the car free, but there is something to be said regarding writing off _some_ of the payment compared to none of it. Also, the insurance cost can be a significant factor. ---
**Author:** ![RobC2](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/robc2/32/239969_2.png) [@RobC2](https://forum.leasehackr.com/u/RobC2)\ **Post date:** [February 11, 2021, 12:36am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/6 "2021-02-11T00:36:32Z")
I am talking about the people who spring up on every “lease vs. buy” thread on every car forum ever and say “Well, I have a business, so I can write it off.” That may be true, but it doesn’t make a bad lease deal good, unless I am missing something. Hence my question. ---
**Author:** ![Ursus](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/ursus/32/4944_2.png) [@Ursus](https://forum.leasehackr.com/u/Ursus)\ **Post date:** [February 11, 2021, 12:58am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/7 "2021-02-11T00:58:21Z")
> [@RobC2](#): > > Let’s also say you use your BMW for 1/3 business and 2/3 personal use. Why would it be a business lease then? You need to use it 75-85% for business to make sense. ---
**Author:** ![cruiserchuck](https://leasehackr.b-cdn.net/letter_avatar/cruiserchuck/32/5_5575768a8748004e209b776fc1b2916d.png) [@cruiserchuck](https://forum.leasehackr.com/u/cruiserchuck)\ **Post date:** [February 11, 2021, 1:08am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/8 "2021-02-11T01:08:26Z")
I think there often is shady accounting involved. I used to go to a bagel store/factory, and there usually were three high end ($80K plus) cars parked there, with personalized license plates with a variation of the name of the company. I would not be surprised if the cars were written off as a company expense, even though I doubt a bagel was ever delivered anywhere in one. I suspect there were essentially the owners’ personal cars, but were treated as business assets for tax purposes. ---
**Author:** ![jeisensc](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/jeisensc/32/224821_2.png) [@jeisensc](https://forum.leasehackr.com/u/jeisensc)\ **Post date:** [February 11, 2021, 1:19am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/9 "2021-02-11T01:19:05Z")
As we enter the land of hypotheticals: > [@RobC2](#): > > What I cannot understand is how some people think that because they are self employed or own a business, they are driving around in their leased BMW for free. Is it just shady accounting, or something more? This has been discussed many times if you search, eg > [@Leasing vs Buying a car for small business write-off](https://forum.leasehackr.com/t/leasing-vs-buying-a-car-for-small-business-write-off/252980/22): > > I’ve been doing some form of this since 2007: I was a 1099 for a couple years, then had an LLC with a partner where I got a W2, and back to a single-member LLC a couple years ago. Nobody here is your CPA, so as a small business owner you should really seek counsel from your accountant. That said… As others mentioned, there is a difference between you doing it and the business doing it. The short answer, in nearly all cases, is that less dollars will be spent if you lease the car and insurance … > [@RobC2](#): > > First month of your business, you make $900. Your only expense is the BMW, which you can use to deduct $300, leaving you with $600 in taxable income. Your tax rate is 1/3 in both cases (to keep it simple). So your taxes without the BMW are $300 and you taxes with the BMW are $200. Which really isn’t the case either. Others have mentioned, you need to use it enough for business to be eligible to deduct it at all. In your example, you have to make enough money to pay your taxes before the lease/insurance/gas/maintenance. I run into people **all the time** who created an LLC and leased, expecting to write it off, until they realized they couldn’t for any number of reasons. I also meet a lot of people whose company have car allowances and lease them a car, C corps who take it as an expense. The answer is always, _it depends_. ---
**Author:** ![RobC2](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/robc2/32/239969_2.png) [@RobC2](https://forum.leasehackr.com/u/RobC2)\ **Post date:** [February 11, 2021, 1:22am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/10 "2021-02-11T01:22:47Z")
Thank you. I guess I missed it in my searches, but it seems your posts agree 100% with my understanding. ---
**Author:** ![jeisensc](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/jeisensc/32/224821_2.png) [@jeisensc](https://forum.leasehackr.com/u/jeisensc)\ **Post date:** [February 11, 2021, 1:33am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/11 "2021-02-11T01:33:28Z")
If you search “business lease” there are 3+ decent threads, plenty of “lease vs buy” (I usually search Section 179 for those). People ask if they can all the time. To your point: a lot of people claim to write off their lease as a business expense. Some don’t, some tried and failed, some cheat on their taxes (and are waiting to get caught), and some do it legitimately. The rules change often enough that it’s always a question for your accountant - not something I would do myself, unsupervised. I find most people creating an LLC to write off their car lease are usually pre-CPA, living the Turbo Tax life (no shade), and want someone on the Internet to tell them “YOLO”, which is latin for “IRS pay plans go on until you die”. ---
**Author:** ![Mike\_Ezginder](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/mike_ezginder/32/25911_2.png) [@Mike\_Ezginder](https://forum.leasehackr.com/u/Mike_Ezginder)\ **Post date:** [February 11, 2021, 2:52am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/12 "2021-02-11T02:52:21Z")
You are pretty much spot on and I give a similar example to friends and acquaintances quite regularly. A lot of people seriously think they are smarter than the taxman. ---
**Author:** ![cruiserchuck](https://leasehackr.b-cdn.net/letter_avatar/cruiserchuck/32/5_5575768a8748004e209b776fc1b2916d.png) [@cruiserchuck](https://forum.leasehackr.com/u/cruiserchuck)\ **Post date:** [February 11, 2021, 3:29am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/13 "2021-02-11T03:29:10Z")
Maybe business returns are different, but I understand that the IRS only audits about 1 in 200 personal tax returns. So you do not really have much to fear from the taxman, which is why some folks get aggressive on their taxes. Some famous Bozo (aka ex-President) allegedly wrote off a billion dollar loss that he did not actually incur, got away with it, and now brags about how it shows how smart he is. ---
**Author:** ![AutoCompanion](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/autocompanion/32/90583_2.png) [@AutoCompanion](https://forum.leasehackr.com/u/AutoCompanion)\ **Post date:** [February 11, 2021, 3:53am UTC](https://forum.leasehackr.com/t/can-someone-explain-tax-benefits-for-business-leases/334120/14 "2021-02-11T03:53:48Z")
> [@jeisensc](#): > > IRS pay plans go on until you die. Do not pass go, do not collect stimmy, go directly to jail.