@taxquestionasker85 wrote:
@Opus 17 @Mike9241 @JotikaT2
Hi All,
The latest replies were unclear to me... I have a leased car not financed.
But "under the hood", so to speak, a lease is what I described. Suppose the price of the car is $50,000. You want to lease it for 3 years, so the dealer determines how much of the car's value you are "using up". Suppose they set the buyout price at $30,000. That means that you are "buying" the first $20,000 of the car's value over 3 years. If the lease is $600 per month, you are paying $21,600, so $1,600 is interest. (I am ignoring sales tax, a down payment, and other things that will adjust the price upwards, that you can take into account.)
Check your original contract. There is an interest specified (it might be called a "money factor") and there are prices specified. Full purchase price, buyout or residual price, and interest rate are all items that can be negotiated if you are a smart buyer.
In the alternative, if you really own nothing, then the entire $40,000 is taxable to you.
