How to Deduct a Car Lease

by Steve Gregory

If you use your leased car while performing your job or for the operation of your business, you can deduct its operating cost as an expense on your taxes. Even though the car is leased, you can still deduct fuel and maintenance expenses because the car is being used for business purposes. To deduct the car's expenses, you need to keep a record of those expenses, perform the correct calculations and fill out specific Internal Revenue Service forms to ensure that the expenses are accurately reported.

Record all of the expenses associated with the operation of the car in a logbook. Gas, oil changes and repairs are examples of expenses to record. Enter the dates and description of each record entry, and save the receipts associated with each record.

Calculate the deductible car fuel expense using the standard mileage-rate method. According to the IRS, you must use this method for leased cars. Go to the Publication 463 Web page on the IRS website, irs.gov, to view the standard mileage-rate deduction amount per mile (see Resources). Multiply the rate by the number of miles the car was driven for business purposes to get the deductible amount.

Complete IRS Form 2106 or Form 2107-EZ to deduct the leased car expenses. Use the log to correctly list and calculate the deductions. Complete IRS Form 1040, Schedule A, to itemize the deductions. Refer to your logbook to confirm the entries are correct. Submit the forms to the IRS.

About the Author

An avid technology enthusiast, Steve Gregory has been writing professionally since 2002. With more than 10 years of experience as a network administrator, Gregory holds an Information Management certificate from the University of Maryland and is pursuing MCSE certification. His work has appeared in numerous online publications, including Chron and GlobalPost.