Can I Write off My Car Lease?

Commuting to your office is not a deductible business expense.

If you use your car for business, you can deduct your driving expenses, even if you lease your vehicle. If you use a leased car or other vehicle entirely for business, you can deduct all your expenses or mileage; if you use it partly for personal errands, you can only deduct the business usage. The IRS has guidelines for what constitutes deductible business driving.

Actual Costs

You can choose to deduct either actual costs or mileage for your leased vehicle. Actual costs are expenses such as gas, repairs, tires and the lease payment itself. You can deduct the percentage of these costs equivalent to the business-use percentage: If 40 percent of your driving is on business, you can deduct 40 percent of your total costs. You must subtract what the IRS calls the "inclusion amount" -- equivalent to a limit on depreciation with an owned car -- from the total business expense. IRS publication 463 details how to do this.

Mileage

If you opt for a deduction per mile, you can log how many miles you drive on business and claim whatever per-mile amount the IRS allows. If you keep a log for the first few weeks of the year showing a consistent mileage -- you visit clients every week, or travel the same sales route -- you can claim the same pattern held up through the rest of the year. You should have records of meetings and activity to provide evidence of a consistent schedule in case the IRS checks.

Qualified Travel

The IRS doesn't count all your work-related travel as deductible travel. You can't write off commuting from home to your regular place of business, even if you're transporting equipment for work. You can, however, write off trips from home or your place of business -- including your home office -- to meet a client or visit a job site. Placing your business logo or other advertising on the side of your car does not make commuting to work or driving for personal reasons a legitimate deduction.

Filing

Write off business expenses on Schedule C, subtracting them from your business income. If you have a loss on Schedule C, you may be able to subtract it from any other income you have. You will have to use form 2106 to provide information on your car deduction, including the mileage, the percentage of business use, the date you started driving it and the evidence you have to support your deduction.

References

• IRS: Travel, Entertainment, Gift and Car Expenses

Resources

• "Entrepreneur"; How to Deduct Your Vehicle Expenses; Bonnie Lee; July 2009