IRS law: physician leasing car?

Question

I am an independent contracting physician for a medical group. I heard you can lease a car and at the end of the year you ger the entire leasing amount back. Is that true? is there a limit to what I can lease? does the car need to be at certain weight? thanks for helping. I just don't want to get audit.

Answer 1

http://www.irs.gov/taxtopics/tc510.html or IRS Publication 473 (both speaking about business use of a car and other travel, entertainment, meals, and automotive expenses for example).

To our knowledge it does not matter if you are a physician, contractor or otherwise, tax topic 510 business use of a car will apply to all people.

Automobiles are subject to automobile rules and all leases are subject to certain restrictions. There is such a thing as you may take the entire lease after you figure out the lease exclusion for example that applies. You may choose to take actual expenses or depreciation and in some cases will depend on many factors. May wish to look at http://www.irs.gov and type in leases and such and you will find out what you need to find out. Sorry cannot be of more help. We have on our site lease versus buy calculators at http://www.bcbsinc.com and other great advice, newsletter, tax reminders, etc. Over 500 pages with excellent navigation.

PS because of depreciation, lease exclusion, luxury auto limits (another thing you may wish to look at with IRS) this is why many choose trucks. Did you know that PT Cruiser is classified as a truck? Did you know that when it comes to the luxury auto limits that you can pretty much write off a 100k vehicle under Section 179 expense deductions and only take maybe 2500 or so on a mercedes that cost about 50k. Now why do you think you see all those nice trucks around and not more Mercedes on the road. Makes sense. This is why Hummer H2 etc was invented and just of course you guessed it, right under the exclusion rate of $105k for the year. What a beautiful world indeed.

Promotion and otherwise, business development, advertisements, meals and entertainment. We have one client that represents a hospital and is a primary director for its cardiology unit that told me one time. I used to let the physicians order the wine when I take them out but I failed to realize at that time that they were buying $200 bottles all the time cause I was normally drunk with them. He changed and now orders the wine. Many write offs and many rules and many tax situations for everyone of us. No two are the same. Good luck and happy taxing.

PS 2. Everyone assumes too much in their responses. Many physicians may be filed as S Corps. Some as LLC, some as Sole Proprietors. Etc. etc. Never assume anything when it comes to the Internal Revenue Code. This is what gets people in trouble. Is the good doctor a Sole Propreitorship or single member LLC that did not elect to be treated as something else? well he did not say that and if not then Schedule C is a waste of words on this page in the responses that follow. Sorry people.

All tax situations differ, all people, all business, all everything is always different and never assume that I can sell you a bridge in the Sahara that is crossing the Atlantic. Currently taking bids on ebay. All forms of payment including governmental assistance, canned goods, and USDA cheese and WIC vouchers accepted. (smiles)

Thank you.

Wayne Barney
President / Accountant
BC Business Services, Inc.

Answer 2

No, you heard wrong, although you would be able to claim part of the lease expense against your income.

You'd have to calculate how much of the mileage on the leased car is personal or commuting miles (not deductible), and how much is business miles (deductible). Commuting miles would be the travel from your home to your office and back. Examples of business miles would include travel from your office to hospitals for patient visits, and travel to conferences.

You would take the percentage of the lease payments that are business miles as an expense against your income. The tax savings would be a percentage of that, and would depend on your tax bracket.

Answer 3

No, it's not true. However as you are self employed, the portion of the lease payment that is related to purely business use IS deductible as a business expense on Schedule C. It, along with your other legitimate business expenses, will reduce your net income and therefore your overall tax liability.

You don't get all of the lease payments back, however. The highest tax bracket is 35% so that's the most you will see returned to you. Since you have to pay self-employment tax on your net income you'd see a savings there as well.