Can You Write Off a Leased Car for Business? (2026 IRS Rules)

Yes, you can write off a leased car for business, but only the business-use share of the costs, and only if you qualify to claim it. Self-employed drivers report it on Schedule C. Most employees cannot deduct unreimbursed car expenses, with a few exceptions. For a car you lease, you pick between the standard mileage rate and actual expenses, and the IRS locks that choice in for the lease.

This guide covers who qualifies, how the business-use percentage works, the 2026 mileage rates, the lease inclusion amount for higher-priced cars (with the 2026 table), a worked hypothetical, and the mileage records the IRS expects. The figures are from IRS pages checked in October 2026.

This is general information, not tax advice. Tax rules change and your facts may differ, so ask a CPA or enrolled agent before you file.

Who Can Actually Deduct a Leased Business Car in 2026

IRS Topic no. 510, Business use of car says most employees cannot deduct unreimbursed car expenses. The exceptions it lists are members of the Armed Forces or military reservists, qualified performing artists, fee-basis state or local government officials, and people who are self-employed. If you fall within an exception and use the car only for business, you may deduct its entire cost of ownership and operation, subject to limits. If you use it for both business and personal driving, you may deduct only the business use.

• Self-employed: deduct car expenses on Schedule C (Form 1040), or Schedule F if you farm.
• Reservists, qualified performing artists and fee-basis officials: Topic no. 510 sends these filers to Form 2106 to figure the deduction.
• Corporations and partnerships: IRS Publication 463 says to use the instructions for their required tax forms instead, so the vehicle is handled on the entity’s own return. Your CPA decides how.
• Employees with full reimbursement: the same publication says an employee who fully accounted to the employer and was fully reimbursed does not need to show those expenses on a return.

If you are setting up a lease through a company, see our guide on leasing a car under a business EIN. For the bigger accounting picture, see how a car is classified as a business asset and whether a leased car counts as an asset.

The Business-Use Rule: Only the Business Percentage Counts

If a car is used for both business and personal purposes, IRS Publication 463 says you must divide expenses between the two, and you can do it by miles. Its own example: a contractor drives 20,000 miles in the year, 12,000 for business and 8,000 personal, and can claim 60 percent (12,000 divided by 20,000) of the cost of operating the car.

The same publication is firm on commuting. Driving between home and your main or regular place of work is a personal commuting expense, no matter how far it is, and even if you take business calls on the way. Advertising your business on the car does not change that. Trips between a regular workplace and a temporary location, or between two workplaces in one day, can qualify.

Two Ways to Calculate Your Deduction: Standard Mileage Rate vs. Actual Expenses

IRS Topic no. 510, Business use of car says you can generally figure a car deduction by the standard mileage rate method or the actual expense method, and that if you qualify for both you may want to figure it both ways first. For a leased car, the choice has a catch.

Method	How it works	Rule that matters for a leased car
Standard mileage rate	Business miles multiplied by the IRS rate for the period. Covers lease payments, gas, insurance, maintenance and registration.	If you choose it for a leased car, you must use it for the entire lease period, including renewals (Topic no. 510). You cannot use it if you have claimed actual expenses on a car you lease.
Actual expenses	Lease payments plus gas, oil, repairs, tires, insurance, registration and licenses, multiplied by your business-use percentage.	For cars above the IRS value table, the lease payment deduction is reduced by the inclusion amount (explained below).

The IRS standard mileage rates page lists these business rates, and Topic no. 510 notes that 2026 has different rates for each half of the year (IRS Announcement 2026-11):

Period	Business rate (cents per mile)
2025 (full year)	70
2026, January 1 to June 30	72.5
2026, July 1 to December 31	76

Rates change, so confirm the figure for the dates you drove before you file. You also cannot use the standard mileage rate if you operate five or more cars at the same time, as in a fleet. Using it does not stop you from deducting business parking and tolls.

How the Lease Inclusion Amount Works (2026 Lease Table)

Under the actual expense method, IRS Publication 463 says that if you lease a car, truck or van for 30 days or more you may have to reduce your lease payment deduction by an inclusion amount. It works like the cap on depreciation you would face if you owned the vehicle. The amount depends on the fair market value of the car on the first day of the lease (or the capitalized cost, if the lease states one) and applies in each year of the lease. The publication lists a $62,000 value threshold for leases that began in 2024 or 2025.

For a lease that begins in calendar year 2026, Rev. Proc. 2026-15 provides Table 3. Here are a few rows (dollar amounts for a full tax year, before proration and before applying business use):

Fair market value over / not over	1st year	2nd year	3rd year	4th year	5th year and later
$62,000 / $64,000	$8	$15	$21	$25	$27
$64,000 / $66,000	$19	$38	$56	$66	$76
$70,000 / $72,000	$51	$109	$160	$191	$220
$100,000 / $110,000	$232	$507	$752	$900	$1,038

To find your inclusion amount for a year, Publication 463 gives these steps:

1. Find the row for the car’s fair market value on the first day of the lease.
2. Take the dollar amount in the column for that tax year of the lease (for the last tax year, use the previous year’s amount).
3. Prorate it for the number of days of the lease that fall in that tax year.
4. Multiply by your business-use percentage for the year. Subtract the result from your lease payment deduction.

Hypothetical example (not an IRS example): a lease begins January 1, 2026 on a car worth $65,000, used 80 percent for business. The first-year table amount is $19, a full year so no proration, and 19 multiplied by 0.80 is about $15. In year two the amount is $38, or about $30. The reduction is small, but it applies every year, and the amounts grow for pricier cars.

Leases that began in earlier years use the table for the year they began; Publication 463 lists them in appendices for 2018 through 2025.

Common Myth: Does Section 179 Cover a Leased Car?

IRS Publication 463 (2025 edition) says that if you lease a car and use actual expenses, you can deduct the part of each lease payment that is for business use, reduced by any inclusion amount. It also says you cannot deduct payments you make to buy a car, even if they are called lease payments. Its separate section 179 discussion covers cars you buy. Whether section 179 can ever apply to your particular lease is a question for a CPA.

What You Can Deduct Under the Actual Expense Method

The business-use percentage applies to the whole list of actual car expenses that the IRS names:

• Lease payments (spread any advance payments over the full lease period)
• Gas and oil
• Repairs and tires
• Insurance
• Registration fees and licenses
• Garage rent
• Tolls and parking fees (deductible under either method if for business)

If you choose the standard mileage rate instead, you cannot deduct lease payments, maintenance, gas, insurance or registration separately for that year.

A Hypothetical Comparison: Standard Mileage vs. Actual Expenses

This hypothetical uses invented numbers, built with the methods above, to show why you should compare both before the first year of a lease. It is not an IRS example and not a prediction for your car.

Item	Standard mileage rate	Actual expenses
Total miles driven in 2026	12,000	12,000
Business miles (70 percent)	8,400 (4,200 each half)	8,400
Lease payments ($500 x 12)	Included in the rate	$6,000
Gas, insurance, upkeep, registration	Included in the rate	$4,000
Calculation	4,200 x $0.725 + 4,200 x $0.76	$10,000 x 70 percent
Deduction (before any inclusion amount)	$6,237	$7,000

Here actual expenses win by $763, but with a lower-cost car or higher mileage the standard rate could come out ahead. Because the lease locks in your choice, run the numbers for the whole lease term, not just year one, and ask a CPA to check them.

Recordkeeping the IRS Expects

IRS Publication 463 says you cannot deduct amounts you approximate or estimate. For car expenses its table of required records includes the cost of each expense, the date, the mileage for each business use, the total miles for the year, your business destination and the business purpose.

• Keep a log, diary or similar record at or near the time of each trip. A log kept weekly that accounts for that week’s use counts as timely.
• Keep documentary evidence such as receipts, bills or statements for each expense.
• A record kept on a computer is considered adequate.
• You may keep an adequate record for part of the year and use it to show business use for the whole year, if you can show those periods are representative.
• Keep records for 3 years from the date you file the return that claims the deduction.

Keep the lease agreement and monthly statements with the log.

Common Mistakes That Get This Deduction Rejected

Claiming it as an employee without an exception. Topic no. 510 says most employees cannot deduct unreimbursed car expenses.

Counting commuting miles as business miles. Home to your regular place of work is personal driving under the IRS rules.

Estimating the log later. Estimated or reconstructed numbers do not meet the requirement unless the records were lost for reasons beyond your control, such as fire or flood.

Switching methods mid-lease. A leased car locked into the standard mileage rate stays on it for the whole lease, and claiming actual expenses rules the standard rate out.

Forgetting the inclusion amount. On a higher-priced car, skipping the reduction overstates the deduction.

Should You Talk to a Tax Professional?

A CPA or enrolled agent is worth a short consult before you sign or before the first filing year, because the method you choose in the first year of a lease binds you for the rest of it. Ask them about your business structure, whether your car’s value triggers an inclusion amount, and how your up-front lease costs are treated. Use the IRS pages linked above to check the latest rates and tables.

What this guide does not cover:

• State tax rules
• Leases of vehicles over 6,000 pounds or special-purpose vehicles
• Employer reimbursement plans in detail

Keep reading

• How Much Can You Depreciate a Car for Business? 2026 IRS Limits
• Are Car Washes Tax Deductible? The Answer May Surprise You
• How to Avoid Paying Tax on a Company Car (Legal Ways)

Frequently Asked Questions

How Do You Write Off a Car Lease With an LLC?

How the deduction is reported depends on how the business is taxed. Sole proprietors report self-employed car expenses on Schedule C (Form 1040), per IRS Topic no. 510. Corporations and partnerships follow the instructions for their own returns, which IRS Publication 463 points to. Either way you still need a mileage record that supports the business-use percentage, so ask a CPA how your entity is taxed before you file.

Are Car Lease Payments Tax Deductible?

For a car used in your business, the business-use share of the lease payment can be deducted under the actual expense method, reduced by the lease inclusion amount if one applies. The part of a payment that covers personal use, such as commuting, is not deductible. Payments that are really a purchase of the car are not lease payments, even if they are called that (IRS Publication 463).

How Much of a Car Lease Can You Write Off?

Only the business share. Divide business miles by total miles for the year: IRS Publication 463 gives 12,000 business miles out of 20,000 total as 60 percent. That percentage is applied to the lease payment and the other actual car costs for the year.

What Is the Maximum Write-Off for a Car Lease?

Neither IRS Publication 463 nor Topic no. 510 sets a flat monthly dollar cap on lease payments. What limits the deduction is your business-use percentage and, for higher-priced cars, the lease inclusion amount for the year your lease began (for 2026 leases, Rev. Proc. 2026-15, Table 3). If you use the standard mileage rate, the deduction is your business miles times the rate.

Can You Use the Standard Mileage Rate on a Leased Car?

Yes, if you meet the IRS conditions. Topic no. 510 says that for a leased car you must use the standard mileage rate for the entire lease period, including renewals, if you choose it. You cannot use it if you have claimed actual expenses on a car you lease.

Can You Deduct the Down Payment on a Car Lease?

Not all at once. IRS Publication 463 says advance payments must be spread over the entire lease period, and only the business share counts. Ask your CPA how your specific lease up-front costs are treated.

Can a W-2 Employee Write Off a Leased Car for Business?

Generally no. IRS Topic no. 510 says most employees cannot deduct unreimbursed car expenses, with exceptions for Armed Forces reservists, qualified performing artists and fee-basis state or local government officials, plus self-employed people. IRS Publication 463 adds that an employee who fully accounts to the employer and is fully reimbursed does not need to show those expenses on a return.

Conclusion

A leased car can reduce a self-employed driver’s tax bill, but only for the business share, and the method you pick in year one stays with you for the lease. Check whether you qualify, track business miles as you go, compare both methods using the right year’s rates and tables, and see our guide on deducting car lease payments for a business for a payment-level view. Then confirm the details with a CPA.