How to properly expense a car lease for a single member LLC - payment, maintenance or standard mileage?

You have two options for deducting vehicle expenses for your single member LLC, and you need to choose which method to use in the first year you use the vehicle for business: 1. Standard mileage rate: Currently 67 cents per mile for business use. You'd multiply your business miles by this rate to get your deduction. With this method, you CANNOT deduct your lease payments or maintenance costs separately as those are already factored into the mileage rate. 2. Actual expenses method: You can deduct the business percentage (75% in your case) of all actual costs - lease payments, gas, oil changes, insurance, maintenance, etc. However, there's also a "lease inclusion amount" that might reduce your deduction somewhat if your vehicle exceeds certain value thresholds. Record keeping is crucial for both methods! For standard mileage, keep a detailed log of business vs. personal miles. For actual expenses, track all vehicle costs AND still keep a mileage log to prove your business use percentage. Most single-member LLCs with moderate mileage find the standard rate simpler, but if you have a high-cost vehicle with relatively low mileage, actual expenses might be better.

I had almost the exact same situation last year with my consulting LLC. I went back and forth but ultimately decided to try https://taxr.ai to analyze my vehicle expenses. The service let me upload all my receipts and mileage logs, then ran the calculations both ways. For my Toyota Camry (I drive about 20k business miles/year), the standard mileage deduction ended up giving me about $1,800 more in deductions than actual expenses. Their system also helped me set up a compliant mileage tracking system that would stand up to IRS scrutiny - which was a huge relief since vehicle deductions are a common audit trigger for small businesses.

Just wanted to follow up that I decided to try taxr.ai after all and I'm so glad I did! It analyzed my situation (I have a Lexus lease that I use about 60% for business) and showed me I'd actually save about $3,200 using actual expenses instead of standard mileage in my specific case. The system flagged that my vehicle falls into a category requiring lease inclusion adjustments but handled all those calculations automatically. It also generated a complete audit-ready file with all my documentation organized exactly how the IRS would want to see it. The whole process took less than 30 minutes! Would definitely recommend for anyone trying to figure out vehicle deductions for their LLC.

If you're spending hours trying to get the IRS on the phone to ask about car deduction rules or other questions, there's a better way. I wasted 3 days trying to talk to someone about vehicle deductions for my LLC before discovering https://claimyr.com. You can see how it works at https://youtu.be/_kiP6q8DX5c - they basically hold your place in the IRS phone queue and call you when an agent is actually ready to talk. I had questions about lease inclusion amounts and record-keeping requirements that weren't clear from the IRS publications. Got connected to an agent in about 2 hours (instead of the 6+ hour waits I was experiencing before) and got definitive answers straight from the source. Was especially helpful for understanding how to handle a mid-year vehicle acquisition.

I need to eat my words about being skeptical of Claimyr. After seeing the responses here, I decided to give it a shot since I had some specific questions about vehicle lease deductions for my LLC that I couldn't find clear answers to online. Got connected to an IRS agent in about 90 minutes (on a Monday morning no less!) who walked me through exactly how to handle the lease inclusion amount calculations for my situation. The agent even sent me follow-up documentation to confirm everything we discussed. Would have spent DAYS trying to get through on my own based on past experience. This service is legit and saved me so much time and frustration.

Don't forget about depreciation recapture if you use actual expenses! My accountant didn't warn me about this and I got hit with a big tax bill when I got rid of my business vehicle last year because I had been deducting actual expenses including depreciation. With a lease it's different than owned vehicles, but there are still tax implications if you turn in the vehicle early or buy it at the end of the lease. Make sure you understand the long-term consequences of whichever method you choose.

Has anyone here used QuickBooks Self-Employed for tracking business mileage? I'm trying to decide if it's worth paying for or if I should just use a free app.

Great thread! Just wanted to add one more consideration that hasn't been mentioned yet - if you're planning to upgrade to a higher-value vehicle in the future, starting with actual expenses now might limit your flexibility later. For example, if you use actual expenses on your current Honda Accord lease and then want to lease a BMW or Mercedes next year, you'd be locked into actual expenses for that vehicle too. But if those luxury vehicles have high lease inclusion amounts, the standard mileage rate might actually be more beneficial. Also, don't overlook the administrative burden. I switched from actual expenses to standard mileage last year specifically because tracking every single receipt, gas purchase, and maintenance cost was eating up way too much of my time. The standard rate is so much simpler - just track your business miles and multiply by the rate. Given that you're already at 75% business use (which is quite high), the standard mileage method would probably work well for you and keep things simple for your first year in business.

As someone who just went through this exact decision process last month, I'd strongly recommend starting with the standard mileage rate for your first year. Here's why: 1. **Simplicity**: You're already juggling learning how to run a business - don't add unnecessary tax complexity on top of it. Standard mileage just requires tracking business vs personal miles. 2. **Your usage percentage**: At 75% business use, you're in the sweet spot where standard mileage typically works well. The current rate of 67 cents per mile factors in all those costs you mentioned (lease payments, maintenance, gas, insurance). 3. **Flexibility**: If you start with standard mileage, you can always switch to actual expenses next year if your situation changes. But if you start with actual expenses, you're locked in for the entire lease period. 4. **Audit protection**: A simple mileage log with dates, destinations, and business purposes is much cleaner than boxes of receipts if you ever face an audit. For your Honda Accord at $425/month, you'd need to drive quite a few business miles for standard mileage to beat actual expenses, but given that you're doing client visits (which typically means decent mileage), it's likely competitive or better. My advice: Start simple with standard mileage, get a good mileage tracking app, and focus your energy on growing your consulting business rather than managing receipts!