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Buying vs. Leasing a car as self-employed physician

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  • Buying vs. Leasing a car as self-employed physician

    I am a 1099. I am looking to buy or lease a new car. Please don't offer advice on not buying or leasing a new car. My mind is made up, and I am trying to find the most tax-advantageous way to do this. I have asked my CPA, but he hasn't gotten back to me very quickly, so I thought I'd see if others here had knowledge of the situation.

    It will be my primary car getting to and from work. Some will be for personal use, but greater than 50% used for business, and honestly probably closer to 80-90%. What I think my understanding is that buying a new car, I can deduct the depreciated value each year, but if I end up selling it for more later on than what it is "worth," that would be recaptured. However, if I lease, I can deduct the entire cost of the lease and maintenance, with inclusion amounts if the fair market value of the car is over $50,000.

    What I cannot figure it is A: is there a limit to the lease amount you can deduct and B: if what I am proposing is actually true for my situation. My father-in-law has owned his own business and has leased cars for many years under this format up until 4-5 years ago, but he and I are not sure how tax laws have changed, and if this situation even applies to the "self employed physician."

    Anyone with knowledge on the situation would be greatly appreciated. Thank you


  • #2
    https://www.irs.gov/faqs/small-busin...ome-expenses-5
    Start here. Commuting is not business.

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    • #3
      I’m not an expert but I do think the 2018 tax laws had an impact on how leases could be written off. I got a lease in 2018 thinking I would be able to deduct it and then the 2018 law changed things for my situation and I never really revisited it.

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      • #4
        Commuting can't be deducted but driving between home office and hospital etc can be deducted. Make sure you have a good reason for home office ie telemedicine, admin work etc and you should be able to rack up the miles. Leasing is most straightforward with high percent business use. With accelerated depreciation buying can get you a big tax break up front, especially if you do 179 deduction and buy a heavy vehicle ie truck or SUV and use 100% for business for the first year (easy to do if you purchase in December). Then you have to keep business use >50% for 5 years to avoid depreciation recapture. If you sell for more than depreciated amount at the end you'll also have to pay tax on that difference.

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        • #5
          I don’t know of any significant changes that would impact your choice. Agree with much of whatHoopoe posted with one caution:
          • If you do work at one hospital and use a HO for admin work only (i.e., your billable work is done at hospital) travel to/from that hospital is a commute to your main place of work. That driving is not deductible.
          • You can contrast this with a doctor working telemed from home who occasionally travels to a hospital, clinic, etc. That travel is deductible.
          You need to ask your CPA to run tax projections with each scenario to determine which is the more beneficial. I can’t give you the final recommendation as I am not your CPA and the decision depends on the individual, specific factors.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            I cannot help you with your question but I am curious if the B is for Bombadil?

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            • #7
              Originally posted by jfoxcpacfp View Post
              .
              You can contrast this with a doctor working telemed from home who occasionally travels to a hospital, clinic, etc. That travel is deductible.
              Does it matter how much work is done at home office vs the hospital? I will have a home office that I will do the same work in as the hospital, but imagine I will spend over 50% of my time at the hospital.

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              • #8
                Originally posted by pierre View Post

                Does it matter how much work is done at home office vs the hospital? I will have a home office that I will do the same work in as the hospital, but imagine I will spend over 50% of my time at the hospital.
                Tough call - where is your main “place of work”? Definitely recommend discussing the specifics with your CPA.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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