Question

Can You Write Off a Car Lease?

Written by JaredReviewed by JaredLast reviewed 2026-08-07

Can you write off a car lease?

Yes, within limits. If your business leases a vehicle, you can generally deduct the business-use percentage of the lease payments under what the IRS calls the actual-expense method, and a separate rule called the lease inclusion amount can shrink that deduction slightly for a pricier vehicle. This page explains how both pieces work using IRS Publication 463.

This is general information, not tax advice. Deduction eligibility depends on facts specific to your business, your entity structure, and how you actually use the vehicle. Talk to a CPA or tax professional before you claim a deduction on a business lease. The entity and personal-guarantee side of leasing through a business, not the tax side, is covered separately in can you lease a car through your business.

How much of a lease payment can a business actually deduct?

The business-use percentage of it, and nothing beyond that. Under the actual-expense method, the IRS lets you deduct the part of each lease payment that is for the vehicle's business use. You cannot deduct the part that covers personal use, including ordinary commuting.

Here is what that looks like on a real number. Take a hypothetical 3-year lease on a $42,000 MSRP vehicle, negotiated to a $40,000 selling price with a 55% residual, computed rather than estimated:

``` msrp $42,000 selling price $40,000 gross cap cost $40,000 adjusted cap $40,000 residual value $23,100 (55% of MSRP) money factor 0.0029 (approx APR 6.96%) term 36 months depreciation $469.44/mo ((adjusted cap - residual) / term) rent charge $182.99/mo ((adjusted cap + residual) x MF) base payment $652.43/mo (before tax) total of base $23,488 over the term ```

If the business uses that vehicle 60% for business and 40% for personal driving, the deductible share is 60% of the payment: about $391.46 a month, roughly $14,093 across the 36-month term, before tax. Drive it 90% for business instead and the deductible share rises with it. The percentage is not a guess you get to pick. It has to reflect how the vehicle is actually used, and the IRS expects you to prove it.

There is also a separate, alternate method worth knowing exists: the standard mileage rate, a flat per-mile amount the IRS sets each year, used instead of tracking actual expenses. If you choose that method for a leased vehicle, you have to use it for the entire lease period; you cannot switch to actual expenses partway through and then switch back. This page focuses on the actual-expense method because that is where the lease-specific inclusion amount applies.

What records do you need to prove the business-use percentage?

A mileage log or comparable records, kept at or near the time you use the vehicle, not reconstructed later from memory. IRS Publication 463 is direct about this: you generally cannot deduct amounts you approximate or estimate. The record needs to show the date, the business purpose, and enough detail to support the split between business and personal mileage.

A timely kept log carries more weight than a spreadsheet built the week before you file. The IRS's own guidance allows a weekly log that captures the pattern of use, so you do not have to write something down after every single trip, as long as the weekly entries are representative of the vehicle's use for the whole period they cover.

This is the point where businesses most often lose a lease deduction: a thin or reconstructed mileage record that will not hold up if it is ever challenged, not the separate fair-market-value rule that applies only to pricier vehicles. Keep the record contemporaneously and the rest of the deduction is straightforward.

What is the lease inclusion amount, and why does it exist?

It is a yearly reduction to your lease-payment deduction, not a bill added to your income directly, that can apply once a leased vehicle's fair market value crosses an IRS threshold. The mechanism exists to keep leasing a pricey vehicle roughly in line, tax-wise, with buying one. An owner who buys the same expensive vehicle faces separate IRS depreciation caps on the write-off; without the inclusion amount, a lease on that same vehicle could otherwise produce a larger deduction with no equivalent limit.

Practically, the inclusion amount works in 3 steps, per Publication 463: look up a dollar figure tied to the vehicle's fair market value and the year the lease began, prorate that figure for the number of days the lease term fell within the tax year, then multiply the result by the business-use percentage for that year. What comes out the other end reduces the amount of lease payment you get to deduct that year.

When does the lease inclusion amount actually apply?

Only above a fair-market-value threshold that the IRS resets periodically, and current published figures put that threshold at $62,000 for a passenger vehicle first leased in 2024 or 2025. Below the threshold for the year your lease began, there is no inclusion amount to worry about at all.

This table, current as of IRS Publication 463 (2025), the most recent edition available at the time of writing, covers passenger vehicles including trucks and vans leased in 2018 or later. The threshold is not static. It has moved most years shown above, so confirm the figure for your own lease-start year on IRS.gov before relying on it, especially if your lease began in 2026 or later, since a newer appendix may exist by the time you read this.

How big is the inclusion amount in practice?

Usually small, smaller than most business owners expect. The IRS publishes its own worked example in Publication 463: a car with a $62,500 fair market value, leased for 3 years starting January 17, 2025, and used 75% for business throughout.

Across the whole 3-year lease in that example, the total inclusion amount adds up to $57, a rounding error next to a lease running several hundred dollars a month. The inclusion amount is a real mechanism and it is worth understanding, but it rarely changes the basic math of whether leasing a vehicle for business use makes sense.

Is this page tax advice?

No, and it is worth saying plainly. This page describes how the actual-expense deduction and the lease inclusion amount generally work, based on IRS Publication 463, a primary source, not how they apply to your specific business, entity structure, income, or vehicle. IRS rules change, publications get updated annually, and individual facts can shift the answer in ways a general content page cannot know.

Talk to a CPA or tax professional before you claim a business deduction for a leased vehicle, especially if the vehicle's value is near the inclusion-amount threshold or your business use is mixed with meaningful personal use. If you are still deciding whether to lease the vehicle through the business at all, or in your own name with the deduction claimed personally, can you lease a car through your business covers that decision, including why a newer LLC or S-corp usually needs a personal guarantee either way.