How do you justify a car lease deduction to the IRS?

madoka

Diamond Member
Jun 22, 2004
4,344
712
121
Reading these articles about the most expensive car lease ever, I started wondering just what are the factors the IRS considers when it looks at car lease deductions?

How can anyone justify a $25K/month lease to the IRS?

https://www.cnet.com/roadshow/news/pagani-huayra-roadster-lease

Leasing can be a way to sneak into a car you might not be able to afford to purchase outright, but when it comes to million-dollar hypercars, that's probably not as true. Putnam Leasing, a company that specializes in leases for exotic vehicles, announced today that it will begin leasing examples of the Pagani Huayra Roadster. With a starting price of $2.7 million, that's a lot of liquidity required, but the most expensive car lease in the world can make it slightly more affordable -- and potentially a tax write-off, if you're a terrible person.

https://www.yahoo.com/tech/most-expensive-car-lease-ever-231050078.html

Putnam Leasing will lease you the open-top handmade Italian hypercar, of which just 100 were slated for production (the same number as the coupe variant), for $25,339 per month. In a time when the average car price in the United States has risen to $36,270, according to Kelley Blue Book, it’s hard do digest that figure. But there’s more to this bank-busting deal.

You must first put down $700,000 and then sign on the dotted line for 60 monthly payments of over $25K. That’s akin to buying both a Rolls-Royce Cullinan and McLaren 720S right off the bat, and then purchasing a Jeep Cherokee every month for five years. As with all leases, monthly payments depend on the down payment and lease duration.

If you crunch the numbers, you’ll find that the total lease price works out to slightly less than the purchase price of a new Huayra Roadster — why wouldn’t the most well-heeled car enthusiasts on the planet just buy one outright? It is because of the terms offered on cars of this caliber.

“Open-end leases are not like historic closed-end leases,” Steven Posner, CEO of Putnam Leasing, told Digital Trends. “It’s not like leasing a Mercedes from a dealer, where you get a closed-end lease on a car for 36 months and then buy or return it.” Open-end vehicle leases, on the other hand, are “more geared towards the individual who wants to own the car at the end.” Putnam also allows clients to transfer their leases to a different comparable vehicle at any time with no penalty.

Posner listed some more benefits, especially when it comes to taxes. Business owners can lease a car for work and make the payment with pre-tax dollars, and then write it off as a business expense. Note that this isn’t a given — though the IRS can’t tell you what to drive, your deduction depends on how you use the car and the case you can make for it.