While leasing a car, it is essential that you go through the sample leases before finalization. The benefits that accrue when a leased car is used for business purposes are quite considerable and the relevant calculations need to be done with care.
To avail tax deductions, it is essential to maintain a log book where the amount of use for business purpose is recorded. It could include going out for business appointments or any other business related travel. Calculate this time as a percentage of total time the car has been used.
The next step is to work out the annual lease payment made and then calculate the cost involved for the use of the car for business purpose. This amount is tax deductible. Thereafter, you should work out the cost involved in running the car like gas, maintenance, insurance, repairs and so on. This too is tax deductible to the extent used for business. Ensure that the “lease inclusion amount” has been factored in. Another thing that has to be kept in mind while availing tax deductions on a leased car used for business is that the amount of lease expense deductible can be reduced in case of cars costing over a prescribed value.
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