If a vehicle is used for business, both leasing and buying carry tax advantages. They work differently, and the difference is large enough to change which one you should choose.

This is general information, not tax advice. Rules change and situations differ, so confirm anything here with your accountant before filing.

What you can deduct on a lease

The business-use share of the lease payment. If the vehicle is used 70% for business, you may deduct 70% of each payment.

Related running costs, at the same business-use percentage: fuel, insurance, maintenance, repairs, parking, and tolls.

The deduction is spread across the lease term, matching the payments.

Why Section 179 does not apply to a lease

This trips people up constantly, so it is worth being precise.

Section 179 lets a business expense the cost of qualifying property in the year it is placed in service, rather than depreciating it over years. It applies to property you own.

On a lease, you do not hold title. There is nothing to depreciate, so a leased vehicle does not qualify for Section 179. You deduct the payments instead.

That is not necessarily worse. It is a different shape: steady deductions across the term rather than a large one up front.

Where buying can win

If a business buys a qualifying vehicle, Section 179 can produce a large first-year deduction, and the thresholds are weight-based:

  • Over 14,000 lbs GVWR: often fully deductible in year one, with no per-vehicle cap.
  • Over 6,000 but under 14,000 lbs GVWR: subject to a cap, $31,300 for 2026. This band covers a lot of full size SUVs and pickups.
  • Under 6,000 lbs: ordinary passenger vehicle limits apply, and they are much lower.

So for a heavy work vehicle kept for years, buying often produces the better tax outcome. For a normal car replaced every three years, leasing is usually simpler and the cash flow is better.

Two ways to claim, and you should compare both

Actual expenses. Deduct the business share of every real cost: lease payments, fuel, insurance, maintenance, repairs.

Standard mileage rate. Deduct a set amount per business mile instead, and skip itemising.

You generally cannot mix them, and for a leased vehicle, if you use the standard mileage rate in the first year, you normally must continue with it for the life of the lease. That is a decision worth modelling before you file the first return, not after.

High-cost vehicle with modest mileage usually favours actual expenses. High mileage in an inexpensive vehicle often favours the standard rate.

The lease inclusion amount

A detail that surprises people. On more expensive leased vehicles, the IRS requires an "inclusion amount" that slightly reduces your deduction, to keep leasing roughly level with the depreciation caps that apply to purchases.

It is usually small, but it exists, and your accountant will apply it from the published tables.

Record keeping is the whole game

The business-use percentage is the number every deduction hangs on, and it is the first thing questioned in an audit.

Keep a contemporaneous mileage log: date, destination, purpose, miles. An app is fine. A reconstruction written the following March is not, and commuting between home and your regular workplace is not business mileage.

If the vehicle is also used personally, that is fine, you just have to track the split honestly.

Leasing through the business

A business without its own credit history will usually need a personal guarantee, which means approval still rests on the owner's personal credit. If you are self employed, the documentation is the same as for a personal lease.

Registering the lease in the business name rather than your own matters for liability and for clean bookkeeping, so it is worth doing properly from the start.

The short version

Lease for a normal vehicle replaced every few years, when you want predictable payments and simple deductions.

Buy when the vehicle is over 6,000 lbs, you keep it for years, and a large first-year deduction is useful to you.

We arrange business leases and finance across multiple lenders, and we are happy to work alongside your accountant on which structure fits. Tell us what the vehicle is for.