- There are two ways to deduct the cost of a leased car, truck or van on your taxes: Take a per-mile deduction for business driving, or deduct the costs, such as gas, oil changes, repairs and lease payments. If you drive the vehicle only on business, you can claim 100 percent of the lease payments and all other costs. If you use it 40 percent for business, 60 percent personal, you can deduct 40 percent of the total costs.
- If you can't claim 100 percent business usage, you have to figure out how many miles you drive for business compared to non-business use. The IRS rules out some travel that you might assume is business: Commuting from your home to work is not business travel, though commuting from work to meet a client or between two job sites is. Making business phone calls while driving or transporting things you need for work does not transform a personal trip into a deductible business expense.
- If you make any advance payments on the lease, you must spread them out over the entire lease period rather than claim them all at once. If you make a lease-to-own arrangement where your payments go toward purchasing the vehicle, you can't deduct them. If you lease a vehicle for more than 30 days, you have to reduce your lease-payment deduction by an inclusion amount based on the value of the vehicle. This is equivalent to the effect of depreciation on the value of a car; IRS Publication 463 describes how to calculate it.
- If you work for someone else, use your leased vehicle on the job and don't get any reimbursement, you may be able to deduct the cost of work-related travel as an unreimbursed business expense. You have to itemize deductions, treating your car use and lease payments as a miscellaneous deduction. Business expenses are among the miscellaneous deductions subject to the IRS' 2 percent limit. Total the deductions in this category, subtract 2 percent of your adjusted gross income, and whatever remains is deductible.