I’ll confess. I like buying, not leasing. When it comes to business cars, though, the answer of which is best isn’t always so cut and dry.
If you want a luxury vehicle (not a heavy vehicle), you actually will get more of a tax break if you lease.
For a car that is worth more than $51,000 that is first leased for business during the year, the lessee must pay income tax each year based on the value spelled out in an IRS table. For example, on a three-year lease for a $75,000 car with a lease term starting in 2021, you reduce the size of your tax deductions for the monthly payments on the vehicle by $8 in 2021, $18 the next year and $26 in 2023.
Think about that a minute. You can deduct everything but $8/month in 2021. Plus deduct gas, oil, repairs, etc. It’s a pretty good deal.
The one exception is if you have a heavy vehicle (greater than 6,000 GVW). In that case, it usually makes more sense to buy it because you can write it all off up front. It doesn’t matter whether you pay all cash or make payments. It’s still all immediately deductible.
Tax strategies always make more sense DURING the tax year. If you wait too long, you lose the opportunity.
The more you know the more you save. Please join us for Wednesday Coaching.