Hello. I have a question about car lease. I own an S corporation and I want to buy a new car, I am considering leasing because I think it would be better in my situation. As some people informed me, I can write off part or full lease payment from my final tax and in that case I pay for the car lease instead of paying tax so I basically drive for free because I would have to pay that amount for tax anyways. The other version is that I cannot write off the lease from final payable tax, I can only make auto expansions (the best way is putting it under mileage which is $0.55 per mile), so it is considered as any other business expenses which are subtracted from my income, so it saves me just some little % from payable tax. My accountant is that there is no such thing as the first option and it doesn't make any difference if I buy or lease a car. I am really confused. I hope you understand what is on my mind. Could you please clear it out for me?

have a question about car lease. I own an S corporation and I want to buy a new car, I am considering leasing because I think it would be better in my situation. As some people informed me, I can write off part or full lease payment from my final tax and in that case I pay for the car lease instead of paying tax so I basically drive for free because I would have to pay that amount for tax anyways. The other version is that I cannot write off the lease from final payable tax, I can only make auto expansions (the best way is putting it under mileage which is $0.55 per mile), so it is considered as any other business expenses which are subtracted from my income, so it saves me just some little % from payable tax. My accountant is that there is no such thing as the first option and it doesn't make any difference if I buy or lease a car. I am really confused. I hope you understand what is on my mind. Could you please clear it out for me?===> With both purchased and leased carfor your S corp, as you know, you can deduct the related expenses by applying either standard mileage rate or actual expenses. Aslongas you own the car, you can choose the standard mileage rate in the first year and switch to the actual expense method in a later year if it becomes more favorable. If you lease a vehicle, you may also choose the standard mileage rate in the first year but must use it for the life of the lease.
With the standard mileage rate, you?ll multiply your yearly business miles by 55.5 cents per mile for 2015 i guess youmay check it wiht the IRS pub . You can also deduct business related parking fees and tolls. For the purchased vehicle, you can also deduct the business percentage (business miles divided by total miles per year) of your interest expense on the loan for your biz use car.
Under the actual expense rules, for both leased and purchased vehicles, you can deduct the business percentage of your gasoline, oil, insurance, garage rent, parking & registration fees, lease or rental fees, repairs, tires, loan interest, etc.
Here is where the expenses differ between purchased and leased vehicles using the actual expense rules.
If you buy your business car, you can deduct its cost over 5 years (known as depreciation under MACRS rule), which does not sound too bad. However, if the car cost is over $15,300, it is considered a ?luxury? car then there are limits on the amount that you can deduct. For example say, you buy a passenger auto for more than $15.3K and weighs no more than 6k lbs, the most you can deduct for ?depreciation? the 1st year is $3,060 and $4,900 for the 2nd year.. so on.
Due to these limits, it could take 12 years depreciate all of the cost a vehicle with the original price of $25k. If you could afford a $60k business car, it would take over 30 years for total write-off of its cost (unless it?s a car more than 6K lbs
In the case of a leased car, . Since you don?t own the car, you can?t depreciate it You can deduct the business percentage of your lease payments. So if your yearly lease payment is $4.2K ($350 / month) and your business use percentage is 80%, you can deduct $3,360 on your tax return for that year NOT the whole of $4.2K. There is one hitch. Since the tax code limits the depreciation on ?luxury? cars, it also limits lease payments on such a car. It?s called a ?lease inclusion amount? and it reduces the deductible lease payments. The higher the original value of the car, the greater the amount.
So, as the price goes up on the car, leasing usually becomes more preferable. But don?t forget if you purchased the vehicle, you can also deduct the business percentage of the interest on the vehicle?s loan.
There is one more difference between buying and leasing a business vehicle. That difference is the disposition of the vehicle. When you dispose of a business vehicle that you own, there may be taxable gain or deductible loss. The portion of any gain that is due to depreciation will be taxed as ordinary income. When you return your leased car to the dealer, there is no taxable gain or loss.