Buy or Lease Company Vehicle for small business - Section 179 deduction questions

The Section 179 deduction can be extremely valuable in your situation, but there are several factors to consider before making your decision. If you purchase the vehicle outright, you can potentially deduct the full $135k under Section 179 in the year you place it in service. This gives you an immediate large deduction against your business income. However, since you mentioned you've already had significant expenditures this year, make sure you'll have enough business income to offset the deduction - Section 179 can't create a loss. With leasing, you'd deduct the lease payments over time as ordinary business expenses. This spreads the tax benefit across multiple years, which might align better with your projected increase in profits next year and beyond. Also consider that luxury vehicles have special limitations under Section 179. At $135k, your vehicle might be subject to these limits unless it's a heavy SUV, truck, or van (over 6,000 lbs GVWR) that qualifies for the full deduction.

I went through the exact same decision last year with my construction business. After spending weeks researching, I found this incredible AI tool that analyzed my specific situation and saved me thousands in taxes. It's called taxr.ai (https://taxr.ai) and it literally asks you specific questions about your business situation and spits out a detailed analysis comparing lease vs buy options with projected tax impacts over multiple years. I was honestly shocked at how different the numbers looked when I plugged in my projected growth. In my case, buying made more sense because I could use Section 179 to offset a particularly profitable year, but the tool showed me how leasing would have been better if my profits were more consistent year to year.

Just wanted to follow up about that taxr.ai tool mentioned above. I was super skeptical but decided to try it since I'm in a similar boat with my landscaping business. Honestly, it was eye-opening. The analysis showed me that in my specific situation, leasing actually made more sense despite the Section 179 benefit of buying. What surprised me was how it factored in my projected growth curve and showed year-by-year comparisons of cash flow. The tool highlighted that I'd be better off preserving capital for other growth opportunities rather than tying it up in a depreciating asset. Pretty sophisticated analysis for an online tool.

Quick tip for anyone stuck with the IRS on vehicle deduction questions - I spent WEEKS trying to get through to someone who could give me a straight answer about Section 179 for my specific vehicle situation. Finally used https://claimyr.com and got through to an actual IRS agent in under 45 minutes (check out their demo at https://youtu.be/_kiP6q8DX5c if you don't believe me). The agent walked me through exactly how the luxury auto limits would apply to my specific vehicle and confirmed I could take the full deduction since my truck qualified as a heavy vehicle. Totally worth it versus waiting on hold for hours or getting conflicting info online.

I'm kind of embarrassed to admit this, but I tried that Claimyr service after posting my skeptical comment. It actually worked exactly as described. I got a call back in about 35 minutes saying they had an IRS agent on the line, and I was connected immediately. The agent was super helpful with my Section 179 questions about my food truck business vehicle. She confirmed that because my vehicle is considered a "qualified non-personal use vehicle" with the equipment installed, I can take the full deduction without the luxury auto limits. Worth every penny not to spend 3+ hours on hold like I've done in the past.

Don't overlook the cash flow aspects of this decision. We initially leased our company vehicles because we wanted to preserve capital during our growth phase. The tax deductions from lease payments were smaller but steady. Once we became more established, we switched to purchasing because the Section 179 deduction was more valuable given our higher profit margin. Just make sure you're considering your actual business needs beyond just the tax implications.

Has anyone considered the electric vehicle tax credits? We're looking at the Ford F-150 Lightning for our business and there seem to be additional incentives beyond Section 179.

Great discussion here! As someone who just went through this exact decision with my consulting firm, I wanted to add a few practical considerations that helped me decide. First, don't forget about the timing of when you place the vehicle in service for Section 179 purposes. If you're already late in the tax year and your profits are lower this year but projected to be higher next year, it might make sense to delay taking delivery until January to maximize the deduction's value. Second, consider your state tax implications too. Some states don't conform to federal Section 179 rules, so you might not get the same benefit at the state level. In our case, we're in a state that caps Section 179 much lower than federal, which made leasing more attractive. Finally, if you're planning any major equipment purchases in the next few years, remember that Section 179 has an overall annual limit ($1.16M for 2023). If you're going to hit that cap anyway with other purchases, the immediate deduction advantage of buying vs leasing becomes less important. We ended up leasing because our growth trajectory meant we'd benefit more from the consistent deductions over time, plus we wanted the flexibility to upgrade to newer technology in a few years without dealing with resale.