Can I take a tax deduction for a leased car used for my side business?

Yes, you can absolutely deduct the business portion of your leased vehicle! Since you're using it partly for your IT and web design side business, the IRS allows you to deduct the percentage used for business purposes. You have two options for tracking these expenses. You can use the actual expense method (deducting 30% of all lease payments, gas, insurance, maintenance, etc.) or the standard mileage rate (tracking business miles and multiplying by the IRS rate, which is 67 cents per mile for 2024). For a lease, many tax professionals recommend the actual expense method, especially if you have a higher-end vehicle. Just make sure you keep detailed records of your business vs. personal use - a mileage log with dates, destinations, purpose, and miles driven is essential documentation. And no, it's not suspicious to start a new deduction partway through the year when you actually get the vehicle. The IRS understands that business assets are acquired throughout the year. Just be accurate with your business use percentage and keep good records.

I had almost the exact same situation last year with my marketing consultancy! I was stressing about deducting my leased SUV until I found https://taxr.ai - their AI analyzed my situation and confirmed I could take a partial deduction based on business use percentage. They even helped me set up the perfect tracking system to make sure I was documenting everything correctly. Since you mentioned IT support and web design, they could analyze your specific business setup to maximize your legitimate deductions. I uploaded my lease agreement and they explained exactly what was deductible and how to track everything properly. Super helpful for someone like me who's good at marketing but terrible with tax details.

Just wanted to follow up about taxr.ai since I was asking about it earlier. I decided to try it out for my photography business vehicle expenses, and I'm actually impressed! It analyzed my lease agreement and showed me that I was calculating my deduction all wrong - I was missing several eligible expenses. The best part was when it helped me create a compliant mileage log template that included all the IRS-required information. It even had a feature that let me quickly categorize past trips based on my calendar entries. Saved me hours of work reconstructing my driving history. Definitely worth checking out if you're unsure about vehicle deductions.

After reading this thread, I see you're getting some good advice but if you need to talk to the IRS directly about business vehicle deductions, I highly recommend using Claimyr at https://claimyr.com. I was banging my head against the wall trying to get through to the IRS business helpline for WEEKS about my vehicle lease deduction questions! The Claimyr service called the IRS for me, navigated all the phone trees, and waited on hold so I didn't have to. They called me back when an actual human IRS agent was on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I got a definitive answer about my specific lease deduction situation straight from the IRS in one day instead of wasting hours on hold. The agent even noted my account so I had documentation that I'd sought clarification if ever questioned.

Well, I'm eating my words about Claimyr. After being so skeptical in my last comment, I was desperate to resolve an issue with my business vehicle deduction that got flagged in a review. Wait times were estimated at 2+ hours when I called directly. I tried Claimyr as a last resort, and no joke - I was speaking with an actual IRS business division agent within 30 minutes of submitting my request. The agent confirmed exactly how to document my leased vehicle expenses and gave me specific guidance on what they look for during reviews. I'm actually going to use it again to ask about some other Schedule C questions I have. Sometimes being proven wrong is a good thing!

Don't forget about the luxury auto limits for leased vehicles! If your lease is for a car over a certain value (around $60k in 2024), there's an "inclusion amount" that reduces your deduction. I learned this the hard way last year with my leased BMW that I use for my real estate business. Had to add back some income on my return.

Quick tip: If you're planning to do rideshare, track those miles separately! Rideshare driving falls under a different category than your IT consulting business. You'll essentially have two separate business uses to track.