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Leased Vehicles and Bonus Depreciation

8/5/2019

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Before the Tax Cuts and Jobs Act (TCJA), your purchase of the vehicle you were leasing did not qualify for either Section 179 expensing or bonus depreciation. But times have changed.
 
The TCJA made two changes that mean 100 percent bonus depreciation is available on the vehicle you lease and then purchase, regardless of whether you purchase it during the lease term or at the end of the lease. The two technical reasons you can do this are as follows:

  1. During the lease, you had no depreciable interest.
  2. Bonus depreciation is now available on used property.
​Technically, the two changes work like this:
 
  • While you were leasing the vehicle, you had no depreciable interest in the vehicle. The lessor depreciated the vehicle. You, the lessee, paid rent.
  • Your purchase of the vehicle that you were leasing is the purchase of a vehicle that you had NOT used under the bonus depreciation law, because you did not have a depreciable interest in it at any time.
 


Note the difference: As with prior law, with Section 179 expensing, you get no additional deductions. But with bonus depreciation, you can now change what you expense.

Contact us for Tax Planning so we can determine if this strategy is going to help you save money.
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    Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

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    To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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    These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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    Author

    Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion.  Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

    Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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