JC Lacayo

I'm not seeing this leasing to your business aspect.
I see if your business is motorsports, but any other business that meets 50% usage rule and other rules?


Because of the costs (up to or over $150k), leasing it to your business, how do you deal with inclusion amounts? etc.?
I just have a feeling this is murky and wouldn't hold up to an audit.

Haven't discussed it with my accountant.

Just curious.

WernerE

Lease inclusion amounts are de-minimus -- they're not going to impact the decision process.

carcommander

In any lease you are going to pay to rent their money. Running a lease thru a business is iffy. There are sales tax implications. If you lease they are expensive to get out of if you decide you want to do something else. You are also betting on a future stream of income to pay the lease.

I personally think you are better off paying for your toys and selling them without difficulty when you want to do something else.

IPSA

This is a relatively accurate and objective analysis. The " finance charge "is higher on a lease but if you get out early and only pay tax on the months you have the car ,given lease inclusion differential you may do a little better on lease. Bigger issue IMHO is getting an option to buy through a lease and having walk away right if things don't work out economically down the road on that particular vehicle. If you own and things don't " work out" you absorb the economic consequences.

That being said Porsche financial does not lease RS cars. They do lease GT3's and 4's.

Choose your poison...

IPSA

Sorry I was referring to post 15, thought I tagged it...

Money2536

Let's think about this mathematically as I just did this exercise with my RS purchase. I'm probably one of the few cases where there is little question that the income from my business is a direct result of the car that I own (YouTube Channel/Retail Store), so I dug in a little further than I normally would have done.

I think it's pretty common knowledge that Porsche financial is not particularly interested in leasing GT cars. I'm unsure why as they'd get quite a few that turn in their cars and Porsche NA would have the opportunity to sell the cars at much higher numbers than the residual values the lease is calculated.

Let's use my RS as an example. I going to use simple interest and rough estimates here, but I think you'll get the point. Let's assume we put nothing down on either.

There are a few companies that structure "sports car" leases specifically for purchases through a corporation.

This is the way I understand it (although probably not completely accurate).

Purchase:
$220,000 for a $210,000 MSRP
Financed at 4% over 60 months

Sales tax paid up front (deductible against income) 6% or $13,200.

Remember that the vehicle them becomes an asset on you balance sheet that is then depreciated.

You'll pay about $23,000 in interest over the life of the loan. Obviously it's ammortized, so year 1 has more interest than year 5. That $23,000 is an expense and would be deductible. In my case 100% deductible. At least that's the case I'm making on my tax return.

Then you are allowed to depreciate the vehicle. Since this is a passenger vehicle, as far as I can tell from reading through the tax code, you are limited to $11,060 in total allowable depreciation.

So over the course of 5 years you'll have $43,000 (depreciation + interest paid) reduced income. Assuming you are in the highest bracket and this is a pass through entity, you're looking at 39.6% + medicare surtax of 3.8% + FICA tax but I'd ignore it for this since the income is so high.

That's a roughly $18,000 tax savings. You'd also be able to deduct the sales tax you paid, so your $13,200 in sales tax would have cost you $7421 after the federal tax savings.

So your net tax savings on the car is about $10,000.

Leased:
$220,000 for a $210,000 MSRP

I looked into a company that offered these terms.

$10,000 down to cover the cost of paying over sticker.
$3031 Payment for 60 months
$60,000 balloon

Sales tax of $600 upfront to cover the down payment.

The entire lease payment would be deductible including the sales tax. $3031 x 60 months = $188,860

You are also able to spread the down payment over the course of the 5 year lease = $198,860 deductible

So you've paid about $12,000 in sales tax throughout the lease of which you deduct, so the tax costs you $7000 after deduction.

So $199,000 in deductions would yield a tax savings of roughly $80,000.

You pay the $60,000 balloon and transfer ownership to you personally.

I'm no tax guy and my math is rounded and rough, but it seems you there is a significant difference in after tax cost to owning a car through a pass through entity.

daddyscar

Anyone been audited with their RS corporate car? It would likely depend on what business you are in. I don't see many situations where you could justify the RS for a business expense to the IRS . . . two seats, loud acoustically and visually. It does have decent cargo space.

JC Lacayo

I know right? Love the pic BTW daddyscar.
I have a business for real estate (tax 'protection'), and another one for my job, and since I drive as much for work that can be applicable (between offices) than what would be used for personal weekends, I could easily get a leased car for my business. But one that costs over $150k? Seems like a tough sell when it comes to taxes.

MMH78

Are there any limitation on the price of the car that you can lease through your corporation?

LastMezger

No kidding. You can do whatever you want when you file your taxes. When they come knocking though you'll have to settle up plus penalties and interest.