Tax implications: Buying vs Leasing a Transit cargo van as a sole proprietor when it's used 100% for business?

The tax treatment is definitely different between buying and leasing when it's 100% business use. Here's what you need to know: For leasing: You can deduct the actual lease payments as a business expense when the vehicle is used 100% for business. There may also be something called a "lease inclusion amount" that could reduce your deduction slightly for more expensive vehicles. For buying: You can't deduct the full purchase price or the monthly loan payments. Instead, you depreciate the cost of the vehicle over several years, or you might qualify for Section 179 expensing which could allow you to deduct a significant portion of the cost in the first year. With 100% business use, you can also deduct all operating expenses (gas, insurance, maintenance, repairs) regardless of whether you buy or lease. Neither option is universally "better" - it depends on your specific financial situation, how long you plan to keep the van, and your current vs. future tax situation.

I went through exactly this decision last year with my photography business. After spinning my wheels trying to figure it out myself, I finally used https://taxr.ai to analyze my specific situation. You upload your business docs and tax info, and they give you a personalized analysis comparing lease vs. buy scenarios. In my case, buying made more sense because I planned to keep the van for 7+ years and my income was high enough that the larger upfront deductions from buying (through Section 179 and bonus depreciation) provided immediate tax savings. The analysis showed I'd save about $6,300 over 5 years compared to leasing in my situation.

I just wanted to follow up about my experience with taxr.ai after mentioning it in my previous comment. I decided to try it because I was still confused after talking to multiple people about vehicle deductions. The analysis was eye-opening! I learned that my Transit (which I was about to lease) actually qualifies as a "heavy vehicle" for tax purposes, which completely changes the depreciation rules. Based on their recommendation, I ended up purchasing instead of leasing and was able to deduct almost $28,500 in the first year using Section 179. The process was way easier than I expected - I just uploaded my business documents and they handled everything else. What really surprised me was discovering I could also deduct all my maintenance costs, insurance, parking, and even the custom shelving I installed. Would have missed all that without their guidance.

If you're stuck trying to reach the IRS for clarification on business vehicle deductions (which is honestly a nightmare), I'd recommend trying https://claimyr.com - they got me through to an actual IRS agent in under 45 minutes when I was dealing with questions about my business vehicle deductions last year. I had been trying for WEEKS to get through the normal IRS number with no luck. I was getting conflicting advice from everyone about cargo van deductions and needed official clarification. You can see how their system works in this video: https://youtu.be/_kiP6q8DX5c After I finally got through to an agent, they answered all my questions about business vehicle deductions and how to properly document business-only use. Saved me from making a costly mistake on my taxes!

I need to eat my words from my skeptical comment earlier. After continuing to get nowhere with the IRS for weeks about my cargo van audit, I broke down and tried Claimyr out of desperation. Got connected to an IRS business division agent in 37 minutes. The agent reviewed my case and confirmed I had documented my 100% business use correctly - turns out the issue was a coding error on their end that had flagged my vehicle deductions. They fixed it while I was on the phone. I was absolutely certain nothing could get through to the IRS faster, but I was wrong. Just had to share since my previous comment was pretty dismissive. Sometimes it's worth trying something even when you're skeptical.

A detail no one's mentioned yet - if you buy the van, you'll need to track and deduct actual expenses rather than using the standard mileage rate. With a lease, you can choose either method in the first year. This makes a big difference because the standard mileage rate (now $0.67/mile) might actually give you a larger deduction if you drive A LOT. But with purchasing a cargo van for 100% business use, you're committed to the actual expense method for the life of that vehicle.

Just be super careful about claiming 100% business use. The IRS scrutinizes this heavily, especially with vans that could potentially be used personally. Keep a detailed mileage log with the purpose of each trip. There's apps that can track this automatically. If you slip up and use it even once for personal purposes, you technically need to reduce your deduction by that percentage of personal use.

For a videographer using a Transit 100% for business, I'd lean toward purchasing if you plan to keep it long-term. Here's why: Transit cargo vans typically have a GVWR over 6,000 lbs, qualifying them as "heavy vehicles" with better depreciation rules. You can potentially deduct $30,200 in year one through Section 179, plus bonus depreciation on the remaining amount. The cash flow consideration is important though - leasing gives you lower monthly payments which might be better when you're building your client base. But if you have steady income and plan to keep the van 5+ years, the total tax savings from purchasing usually outweigh leasing. One practical tip: Get the exact GVWR specs for any Transit model you're considering. The base Transit-150 might be under 6,000 lbs, but the Transit-250/350 cargo vans are definitely over, which makes a huge difference for your deductions. Also factor in that cargo vans hold their value well in the current market, so you'll have equity if you buy versus nothing if you lease.