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Returning Member
posted Dec 5, 2023 2:16:29 PM

Leasing my car to my friend

If I were to lease my car (currently financed) to my friend for a year, could I write off 100% of the monthly payment through my LLC? 

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6 Replies
Level 15
Dec 5, 2023 4:09:01 PM

No. 

 

If you're leasing the car to your friend at fair rental value for more than one year, then you would use a cost recovery method that is applicable to your type of vehicle. 

Returning Member
Dec 5, 2023 5:54:49 PM

Thanks for the quick response!


So I wouldn’t be able to deduct the car payment as a business expense, even though the vehicle is being used 100% for business? 

Level 15
Dec 5, 2023 6:42:50 PM

You stated you were going to lease the car to a friend. Is that not correct?

 

The car payment would not be a business expense for that purpose unless your business was leasing cars.

 

You could, however, take depreciation deductions as I stated in the previous post.

Returning Member
Dec 5, 2023 6:51:18 PM

Yes, I have a car that I pay $300 a month for. If I were to lease that car to my friend for $300 a month, can I expense my $300 payment like I do with my other vehicles I use for business? 

Level 15
Dec 6, 2023 6:21:23 AM

No, as was explained earlier.

Level 15
Dec 6, 2023 7:10:13 AM

From your description, you are engaged in a "not for profit" activity. As such, you deductions are limited to your income and can only be reported on Schedule A (itemized deductions).  If you don't normally itemize, you effectively don't get any deduction and the entire $300/month is income. 

 

Even on Schedule A, you may not deduct your payment. You may deduct "regular" car deductions ("cost recovery method that is applicable to your type of vehicle") like interest, insurance, and depreciation. 

 

See IRS publication 525, particularly pages 17 & 32. https://www.irs.gov/pub/irs-pdf/p525.pdf