re: If an employer pays full mileage rate, does leasing make sense?

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All very good points here. However, whether you are reimbursed, or not, for mileage, does not determine your deductions. If you use a car in business, you either claim mileage or actual expenses. It has nothing to do with whether or not you are reimbursed, or a 1099 employee, or a partner, or owner. The depreciation route, Section 529 deduction, etc... are taken if you itemize your deductions on the vehicle. Once you choose one way or the other you can't switch back (I believe there are exceptions). If you choose mileage, and a company reimburses you at full IRS rates, less than IRS rates, or more than IRS rates, you still have to report that reimbursement against your mileage claim.

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With all due respect, it sounds like you know just enough to be dangerous, but not enough to be correct.

You didn't answer my question as to the type of posistion she holds, so I assume she is a W-2 employee.

If your wife is being reimbursed for mileage, and it's not taxed, you can't additionally take tax deductions for the car, to the extent in which you were reimbursed. This includes mileage deductions and/or actual expense deductions.

The only exception would be if she's not being reimbursed for ALL her business miles, or, if she is being reimbursed at less than the IRS rate. Then, she can claim mileage on the difference.

However, if she is a W-2 employee, she can only claim mileage as a 2 percent miscellaneous itemized deduction, and if y'all make that much money, the threshhold might be too high. Plus, sounds like your income is in AMT territory, and miscellaneous itemized deductions are not allowed for AMT.