OT: self employeed - so lease? or no?

My wife recently took a leave of absence from her normal job ( new baby in the house guys ) and is working from home. She's writing in a self-employeed, freelance situation and is doing quite well. I've always heard that if you own our own business or work for yourself, that it's extremely advantageous to lease a car because you can write off all or a portion of the lease cost.... Our accountant says instead that she should record mileage and that leasing vs buying doesn't matter. I am not interested in doing anything that'll land me in trouble with the IRS, but is my accountant being too conservative in this case? - that definitely IS his nature. My wife's mileage would be pretty low (trips to libraries, etc.), so I'd much rather try to get a portion of the lease cost of an upcoming purchase. Note: she should bill for about $50K / year. Does anyone have any experience I this area? - I'm trying to determine if I should consult a different accountant, or if perhaps I just misunderstood the tax advantage of leasing in the first place. Thanks very much everyone, Scott

Look at section 179 if you are going to purchase a large SUV. You can deduct 100% of the cost of it in the year purchased. http://www.insideoffice.com/insideof...ection179.html

Suggestion: Do not take tax advice from this forum. There is so much misinformation posted here over the years that it will get you in so much tax audit problems it will make your head swim. The advice is coming mostly from self-employed and professionals who do not understand (or are in denial) about the real implementation of the IRS tax code with respect to deductions, among other things. I was going to post some advice but instead I recomend you talk to an trusted, competent accountant about leasing and business deductions and self-employment.

Thank you Greg for the link on 179. That story, as well as the attched IRS link, was useful. JC: thanks also for the words of caution. I'll make sure I follow up and "ideas" with a professional before actually implimenting them.

I wasn't meaning to dispense tax advice. Just an idea on why buying a certain vehicle might be better than leasing. I just went through this, as my wife is a realtor, and we needed a new vehicle. We discussed it with our accountant and we were able to get a new Denali Yukon for a net cost of around $30k. And 0% financing (Thanks Phil!) As with everything you should find an accountant that fits you and your personality. Some may not want to push, so they never have to "defend" their client. Others make sure you get every penny you are entitled to, just make sure you have all records in order etc. It never hurts to get a second opinion.

I agree about not taking tax advice from unqualified individuals. All I know is that for some reason or another my accountant always tells me that my business does not qualify for or would not gain any advantage by trying to write off an auto lease. I personally do not lease cars because of any tax advantage. I lease them because it allows me to get a new car every couple years for a monthly payment that is much lower than traditional financing. It may sound corny, but leasing is a lifestyle choice for me. I know that I will never hold the pink slip to a car, and I will be making payments forever, but I will always have a new car under warranty in my garage.

Mileage.

Greg, The comment was not directed at you for what it's worth. In fact pointing someone to a IRS document is good advice!

I agree with JC in NY - discuss the matter with a competent professional - which I trust describes your current accountant. Your question has many potential tentacles and they would be too arduous to discuss here - however, when it comes to tax matters involving company autos, pay particular attention to the impact of personal vs. business usage.

if you own a car the same deductions apply, and you know in advance that you can afford it which provides a certain comfort, and it keeps you from stretching beyond you means. a simple concept: save then buy makes for more robust net worth growth, and deduct as your advisor or you decide.

then increase your payments to lower your residual--buyout can be stuctured to only 15% of purchase price in 3 years. great only if you want to keep the car for a long time. the trick is being able to justify a high % of business miles.

The advice to listen to the most should definitely come from a professional, but these forums do serve as a source of information and interest-piqueing tidbits. fwiw, I have just gone through this w/ my accountant in the last week. He is not particularly conservative. I have an S corp and will use my new P-car as my primary means of transport. Given the three choices; buy outright, balloon loan or lease, in my situation the accountant said that there would not be much difference between writing off the lease payment or depreciating the car if purchased, over the long haul (4 - 5 years). Part of the equation for me has to do w/ risk management, and not holding the car as a personal asset in the case of someone taking me to court for whatever. In the end, I chose the balloon w/ the car being titled to the company. Mostly so that I could hang on to my capital and invest it otherwise, depreciate the car, as well as write off the mileage and other costs (which you can do in any case as a business expense). With the TT being so far up in the "luxury" car range, we certainly aren't going to be able to take full depreciation anyway w/out the IRS being my new worst friend, so the balloon seems to be the best route, for me. (P.S. --- I didn't even know about the balloon loan angle for cars until two weeks ago; again, thanks to this forum!!!) Good luck!

Hello I lease my 996 and write off about 70% of the costs associated with operating it (lease, cleaning, etc) I am told by my accountant that this is possible b/c 1) my office is technically my home and I am an independent contractor for 2 ER's that require me to drive between 3 and 6 days a week He says that if I ran a business from home which did not require me to drive as much that this would not be possible. as an aside there are people in my group who have Incorporated and then lend their corporations money to purchase cars "for work" then pay them selves back with interest! Jason

Jason --- You're right, there's a bunch of different ways to go about it. A guy that I work with has an incorporated business w/ one employee, himself. The corporation leases a vehicle for his business use. From whom does the corporation lease this vehicle? HIM! And he is leasing the car from a dealer to begin with. The same can be done w/ a purchased car, as far as I know. It is amazing what you can do, well within the bounds of the tax code, once you engage the services of an accountant w/ the right level of experience. Jeff