Can Someone Explain Tax Benefits For Business Leases?

[jeisensc]

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

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.