Business Use

• A taxpayer may not deduct expenses associated with leasing a car if the car is used 100 percent for personal purposes. The taxpayer may only deduct leased car expenses if she used the car for business purposes and did not receive reimbursement for such use. The taxpayer may claim 100 percent of leased car expenses if she used the car only for business purposes. If she used the car for business and personal purposes, only that percentage that applied to business use may be deducted.
  
  

Standard Mileage Rate

• A taxpayer who leased a car for business purposes may use the standard mileage rate to determine her tax deduction. The standard mileage rate may fluctuate and sometimes changes during the year. The standard mileage rate for the 2010 tax year was 50 cents per mile. The taxpayer may only claim the standard mileage rate for miles driven for business purposes. A taxpayer who elects the standard mileage rate method during the first year she used the leased car for business purposes must use the standard mileage rate for the remainder of the lease, to include any renewals of the lease.
  
  

Actual Expenses

• A taxpayer who leases a car for business purposes may use the actual expenses method to determine her tax deduction. Actual expenses include all costs of operating the car including fuel, oil, scheduled maintenance, repair work, parts, tires, licensing and registration, automobile insurance and lease payments. A taxpayer who uses her leased car for less than 100 percent business purpose must determine the percentage of business usage. The IRS recommends dividing the total number of business miles driven by the total number of miles driven during the tax year to determine the percentage of business usage.
  
  

Reporting

• A taxpayer who is an employee must itemize her deductions to claim unreimbursed leased car expenses as an employee business expense. She will figure her deduction on IRS Form 2106 - Employee Business Expenses and report the qualifying amount on IRS Form 1040, Schedule A - Itemized Deductions. A taxpayer who operates a business will typically report leased car expenses on IRS Form 1040, Schedule C - Profit or Loss From Business.