Tax Deduction on One-Pay Lease

Good day;

Was wondering if a (qualified for business) one-pay lease could be tax deductible the same year or if you can only deduct 1/3 per year.

Thanks

While this is a question best left for your tax guy, I believe you would treat it as a prepaid service and deduct as it is used, so 1/3rd at a time.

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You should consult your tax professional

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Thank you @mllcb42. My tax accountant said it is deductible the year that you pay, even if it is one-pay lease for 3 years.

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Your accountant told you to expense the entirety of the prepaid 3yr lease on day one?

Check the rules on section 179 deductions. Def best to ask your tax person but there’s plenty of info online

The rule is generally one year of prepayment. Is your business cash or accrual basis? And any depreciation rules only relate to purchased vehicles, not leases.

If you pay the whole lease amount on year 1, Yes! You could only deduct if you pay that year. And you should multiply by the percentage of business use over the whole usage. For instance, a 10k one-pay lease, used 90% for business and 10% personal, yields a 9k deduction the first year, and nothing the next two years. That’s from my accountant.

Folks, My accountant just dug in some more and there seems to be a there is a 12-month prepay limit that he forgot to mention in earlier communication. This means if I do a one-pay lease, I could do 2019 and 2020 but cannot do 2021 and 2022.

Is your business cash basis or accrual basis?

Cash basis.

Is the lease you are considering a 48mo one pay?

36 - one-pay