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LearnFAQSelf-Employed & Small Business

If I lease my car, can I still deduct mileage or only the lease payments?

Answer

You can use either method for a leased car, but the choice locks in for the entire lease term. Pick the standard mileage rate and you deduct business miles times the IRS rate; you cannot also deduct the lease payments separately. Choose actual expenses and you deduct the business-use share of lease payments plus fuel, insurance, and maintenance, but the IRS applies a 'lease inclusion' amount that slightly reduces the deduction on higher-value cars. Unlike an owned vehicle, you cannot switch methods mid-lease, so decide up front. For expensive leased cars driven modestly, actual expenses often beat mileage; for high-mileage economical leases, the standard rate usually wins.

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