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If you lease a car over buying it, how much can you write off of the car lease for the LLC?

Given that you can lease it through the business, is that a more wise decision than buying financially?

This question applies to California, USA.

  • 3
    What country? What state? Tax questions require those details. – Chris W. Rea Oct 17 '12 at 0:23
  • California USA is the place – Daniel Fischer Oct 17 '12 at 9:43
  • I don't think "write off" is the word you are looking for. If your business bought a car you would "write off" part of the cost each year' but if your business leases a car you can only count (all or some of) the lease payments as expenses. – DJClayworth Oct 17 '12 at 15:41
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An expense is an expense. You can deduct your lease payment subject to some limitations, but you don't make out by having more expenses. Higher expenses mean lower profit.

Is leasing better than owning? It depends on the car you'd buy. If your business doesn't benefit from flashiness of your car, then buying a quality used car (a few years old at most) would probably be a wiser decision financially.

I'd think hard about whether you really need an up-to-date car.

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  • If the car is used partly for business and partly for personal matters, is the entire lease payment deductible as a business expense of the LLC or only a proportional part? If the LLC is the lessee instead of the OP personally, then doesn't the personal use get passed through as additional income to the OP? – Dilip Sarwate Oct 17 '12 at 3:41
  • @Dilip has it right, leasing a car through your business is an expense to the extent the use is for the business, the rest is an income to the owner from the business. Also, it is (probably) a red flag for audits. – littleadv Oct 17 '12 at 5:45
  • Correct. That statement (deducting business use part only) is in the first paragraph of the linked IRS page. In any case, the question was more asking if leasing was better than buying, so I focused on that aspect. Nonetheless, I edited my answer to address this. – mbhunter Oct 17 '12 at 18:16

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