Just got my personal business And I am thinking about getting a truck to use exclusively for the business. Will my lease payments be deductible? Is this worth it? Has anybody done this before?
Whether this will work out for you depends on how you will use the vehicle in your business. Most of the time, the standard mileage rate exceeds the actual expenses of a vehicle used in a business.
The IRS mileage rate for 2021 is 56 cents per mile. You can deduct your vehicle expenses in one of two ways. You can track all your car expenses, including gas, oil, repairs, insurance, and depreciation, and deduct the portion of your total car expenses that apply to business miles. Or you can deduct a flat rate for every business mile you drive, which is called the standard mileage deduction.
If you have a car payment, you can deduct the interest portion of the car payment. If you have a leased vehicle you can deduct the lease payment in proportion to the amount of business use of the vehicle.
The down payment and cost of the vehicle is depreciated over the life of the vehicle. You also need to have enough business income to cover the deductions that you take.
For a vehicle used exclusively for business, you can use the standard mileage rate or the actual expense method. The standard mileage rate includes allowances for fuel, maintenance, repairs, insurance, and depreciation. The only expenses you can deduct on top of the standard mileage rate is tolls. This has the least record keeping burden.
Or you can deduct your actual expenses. This includes the lease payments, fuel, repairs, maintenance and insurance. You need to track your expenses over the course of the year. If the vehicle is used 100% for business, you don't have to separately track your mileage, but if you also use it for personal use, you must track your milage and only deduct the percentage of expenses equal to the percentage of business use.
Also, the standard mileage rate only applies to vehicles under 6000 pounds unloaded gross weight. There are some other rules governing the decision of standard mileage rate or actual expenses. All these rules are covered in chapter 4 of publication 463, https://www.irs.gov/pub/irs-pdf/p463.pdf
It is frequently stated that the standard mileage rate is more favorable for most vehicles, however, you would have to make this determination yourself based on the cost of the vehicle and how many miles you expect to drive.