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    1 Reply Latest reply on Aug 20, 2010 2:26 PM by mikevcpa

    Leasing a vehicle from a non-employee

    accounting24 Newbie
      This is a doozy. Have a client who wants to lease a vehicle from his girlfriend. She is not an employee of the company, he will use the vehicle for the company very little. He is a LLC. She makes payments on the vehicle currently. She has no business. Question is, can she take vehicle payments off her taxes to offset the lease income when she has no business?
        • Re: Leasing a vehicle from a non-employee

          Hi accounting24,

          Perhaps not too much of a doozy, but you'll want to be careful.

          By virtue of leasing a car to the business, she becomes a de facto sole proprietorship (business) herself.

          That means depreciating the car, accounting for maintenance, oil, registration, taxes, interest, etc. and reporting it on Schedule C. She cannot deduct car payments. She can only deduct the interest portion of those car payments.

          She will need to apportion the costs based on the time she drives it and the LLC uses it. She can use mileage for the apportionment factor. She might be able to just use the standard mileage rate (currently $0.50/mile, I think) for any miles used by the LLC in lieu of accounting and keeping track of all the other costs.

          You will need to have a very clear contract between her and the LLC for the lease.


          The IRS has a helpline that is sometimes helpful and they can point out any gotchas.


          Hope this helps