Is Mileage Paid on a Lease Tax Deductible?
- When it comes to tax deductions for vehicles, the biggest question is whether or not it's a business expense. In some cases -- such as a fleet vehicle maintained by a company -- it's a clear case of yes. In others, like driving your minivan to soccer games, it's a clear case of no. If you use a single vehicle for both business and personal tasks, you should keep a detailed journal of each trip and deduct only the mileage expenses associated with your business.
- When calculating vehicle expenses for your business, you have the option of taking a standardized per-mile IRS deduction, or working out the total expenses of operating your vehicle for the year. If you choose the standard deduction, your mileage costs for a lease are considered part of the standard expense and should not be deducted in addition to the standard deduction. If you opt for itemized deduction, the mileage charge may be applicable.
- Even if your vehicle is used primarily for business purposes, tax law forbids taking deductions for mileage accumulated during personal use. This is often a gray area in tax law. For example, many self-employed people will do personal and business errands in a company car during the same trip. If you receive a mileage reimbursement from your company, the lease mileage is also considered a personal expense. This is because you have been compensated for the business usage.
- Tax law is highly complex, and mistakes can cost thousands of dollars in interest and penalties. If you have any doubts at all about the tax status of your vehicle-related expenses, you should check with your lawyer or accountant. If that professional makes a mistake, the expenses come out of his errors and omissions insurance -- not out of your pocket.
