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

Posted on 8/4/14 at 9:20 am to
Posted by LSUFanHouston
NOLA
Member since Jul 2009
38097 posts
Posted on 8/4/14 at 9:20 am to
quote:

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.


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.
Posted by hungryone
river parishes
Member since Sep 2010
11987 posts
Posted on 8/4/14 at 10:11 am to
Someone help me out: what job "requires" a luxury car? Seriously...I'm in the wealth business, and I can't think of a single circumstance where the sort of car someone drives has any bearing on a business deal.

If you're ferrying clients from point to point, airport, etc, use a car service.
Posted by CubsFanBudMan
Member since Jul 2008
5384 posts
Posted on 8/5/14 at 4:08 pm to
quote:

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.


Can a taxpayer choose the actual expense method when being reimbursed the full IRS rate? I would think they can. If the actual expense method is higher than what is reimbursed, the taxpayer shouldn't be penalized. If actual expenses are $10,000 and standard mileage rate reimburses $9,000, taxpayer should be able to deduct $1,000, subject to 2% misc deduction rules.

Personally, the tax deduction question should not factor into this decision. Run the numbers with a 6 or 7 year note. Factor in the the value of the car vs the balance of the note at the end of 3 years. Compare that with the residual value of the lease.

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