Car leasing comes with a number of benefits, from being able to skip on the down payment to making sure that all major repairs will be taken care of by the dealership, not you. These are just some of the benefits you can expect when you lease a car, but that is not all. There are still other ways that leasing keeps more cash in your pocket if you pay attention to some of the tax benefits.
Understand the Taxes
The first thing you should know is how taxes are charged because this is one way that leasing helps you out. Okay, so you know that purchasing a car usually means you are financing it. The financing process involves an entity buying the car for you, and now it is up to you to pay the lender back. This company is not going to lend you money without getting something in return, which is why you end up paying interest. Keep in mind that the new car loses value immediately.
It should be noted that purchasing the car means the monthly car payments are going to be based on the entire value of the car and so are the taxes. Now, every state is different, so the amount of taxes you are going to pay to purchase a car is going to be different depending where you live, but purchasing is still going to yield a higher tax.
When you lease, you do not have to worry about paying taxes on the entire value of the car. You are going to be paying the depreciation value during the lease term, which is calculated by the leaser. The taxes you are going to owe are going to derive from the estimated value. Again, this can change from state to state, but you can be sure that it is going to be cheaper than what you would pay if you buy the vehicle.
This is a difference that benefits anyone who leases a car, but there is still more to tell.
Tax Benefits for Business Drivers
Those who use their car for business purposes might be able to claim even more benefits on top of the ones mentioned. You may be able to deduct the business portion of the lease payments on your taxes. It is important to consider the fact that the amount that is deductible can change at any given time, meaning that what you deduct one year may not be the same the next. This is why it is highly recommended that you talk to a tax specialist to ensure that your numbers are being entered correctly.
If you feel this is not enough, you may be happy to know that you can also deduct maintenance expenses and even gas when you use your car for business purposes. Of course, details are very important to be able to do this accurately, which should avoid any problems with the IRS.
First, you will need to keep a copy of every receipt for your expenses, such as gas and your monthly installments. You are going to want to keep an accurate time log that shows when and how you used your car for business purposes.
You want to make sure that you jot down all of this information digitally and back it up using paper and cloud services. There are even some apps you can download that might prove helpful. You do not want to find yourself needing this information during tax season and discover you lost it. Entering all of this information digitally helps ensure that you double check your information to avoid errors that could cost you money later.
Those who do not use their leased car for business purposes should consider starting up a side business that requires driving so that they can take advantage of some of these benefits.
Be sure to consider having a tax consultant deal with all of these numbers for you because the possibility of errors increases when you start calculating these benefits.
You can see why many people are opting to lease a car instead of buying one. It is a good idea and a win-win situation for you because of all the money you get to save while enjoying a reliable, new car.