There is a longstanding debate about whether it’s better to buy or lease a car. Both options come with their own set of advantages and disadvantages, making the decision highly dependent on individual needs, preferences, and financial circumstances.
In the eyes of real estate mogul Grant Cardone, the choice between buying and leasing cars is straightforward: lease all but one.
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“There’s only one car you buy, and the rest you lease,” he stated in a YouTube video earlier this year.
Cardone revealed the specific vehicle he chose to purchase and his reasons for doing so.
“$150,000 Range Rover. It weighs 6,000 pounds. Section 179 of IRS says anything over 6,000 pounds, you can write off 100%. You could buy it on December 31, write it off that year, even though you didn’t even drive the car,” he said. “Boom! $158,000 you get to write it off, that day, against your earned income, if you have self employment money, or an LLC producing other income.”
He has put this strategy into action.
“I would pay cash for the Ranger Rover — we did,” he revealed.
Cardone, who frequently travels on a Gulfstream G650ER private jet, also embraces leasing vehicles, such as a Rolls Royce Cullinan, which starts at around $392,000.
The reason for this choice also involves tax benefits.
“The Cullinan that I have is a leased vehicle. I leased it with no money. I put it on a 24-month lease — never longer than that. Whatever the payment is, if you can’t handle that payment, don’t do it. And then every 24 months I trade that car in. Why do I do a lease rather than own? Because I can write off 100% of that lease payment every month against my business income,” he elaborated.
Now, before rushing to your nearest Range Rover dealer, let’s take a closer look at the relevant tax codes from the Internal Revenue Service.
Section 179
Section 179 of the United States Internal Revenue Code allows taxpayers to elect to deduct the cost of certain types of property, including vehicles, on their income taxes as an expense rather than capitalizing and depreciating the property over time.
To qualify for the Section 179 deduction, the vehicle must be used for business purposes more than 50% of the time. If the vehicle is used partially for business, only the percentage of business use can be deducted.
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Moreover, the IRS specifies that “You cannot elect to expense more than $28,900 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service in tax years beginning in 2023.”
This limit applies to any 4-wheeled vehicle primarily designed to carry passengers over public streets and highways, with a gross vehicle weight rating (GVWR) of more than 6,000 pounds but not more than 14,000 pounds.
For tax years beginning in 2024, the maximum Section 179 deduction for such vehicles is increased to $30,500.
Lease write-offs
Leasing a vehicle for business purposes can also provide tax benefits, but it’s important to understand the specifics of what can be written off.
To write off lease expenses, the vehicle must be primarily used for business purposes. If the vehicle is also driven for personal use, you can only deduct the portion of the lease payments that corresponds to business use. For example, if you use the vehicle 75% for business and 25% for personal use, you can deduct 75% of the lease payments.
Additionally, the IRS imposes a “lease inclusion amount” for leased vehicles with a fair market value above a specified threshold. When applicable, this amount must be accounted for in each tax year you lease the vehicle. Instead of adding this inclusion amount to your income, you reduce your deductible lease payment by this amount. The exact inclusion amount varies based on the vehicle’s value and the specific tax year.
To maximize the potential tax benefits of your next vehicle purchase and ensure compliance with IRS regulations, it is best to consult a tax professional who can help you navigate the complexities of the tax code.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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