Tax benefit of Ferrari lease

You would have to talk to your tax professional, your sales tax is amortized over the leangth of the lease.

 

"Ferrari" and "tax benefit" are words that should never be uttered in the same sentence.



Mark

 

Write it all off. I mean, after all, it couldn't possibly flag you for an audit.

 

In what world can you write off a personal vehicle? Even here in GA, there is property tax on cars (TAVT) but I couldn't write it off.

 

Just for fun I'll take a shot at this. I am not a tax adviser of any sort nor am I a lawyer. nothing i write should be relied on without independent confirmation by your own professional advisers. This s not legal advice.

In general the IRS allows a deduction for the expense of running a vehicle for business purposes. If you drive 50% personal and 50% business, you can deduct half of the expense of the car (lease, gas, maintenance, insurance, etc).

In general the IRS defers to the judgement of the business in what it spends its money on. So if you build a pipeline to transport oil and try to deduct it, the IRS will not say, it would be more cost effective to ship by tank car so we are disallowing the pipeline as a business expense. The same applies to a car: if you use a German SUV instead of a Ford pickup truck to haul your electrician tools to a job site, it would be deductible to the same extent. (Business use of a vehicle require extensive records like date and time of the trip, start and end millage, business purpose of the trip, other people present, what was discussed/done). all personal use has to be logged also to get a ratio of business vs. personal.

Those general rules being said, I think a Ferrari deducted for business use would cause an emotional response if noticed. And noticing would be not very hard. Once when I shopped my personal auto/home/liability insurance to an agent, he looked for five seconds at the application and said "who owns the Ferrari". I mean it stands out like a sore thumb.

Application of regulations and laws has a lot of leeway for discretion. If you try to deduct a Ferrari, even if it meets the letter of the law, you will probably get a person or more who makes it their personal goal to hang you out to dry if at all possible using every discretionary call in the book.

Some people do deduct Ferrari's: driving experience companies that charge you to drive their supercar, rental companies, movie production companies, etc. Perhaps if you drive customers around town for Uber in your Ferrari, you have a good case for deducting part of it. I was told by an Uber driver in South Beach that there was one who did.

 

Dolphan, take this in the goodwill it is intended. Many people lease because they are unable to buy the vehicle outright. If you are trying to stretch it even further by trying to figure some sort of tax advantage, you are better off waiting, saving your money, and buying/leasing a little later.

Doug gave you some good advice.

 

Zero

 

Yeah, good luck with that one.

To the OP, forget it. If you have to lease a Ferrari you can't afford it.

 

I don't necessarily agree with that. Leasing is usually less cost effective than buying, and I'm sure that there are many people that lease with the intention of "upgrading" every few years, and also making your name known throughout Ferrari, which may help your case if you ever want to buy a limited production car. Plus, you don't have the worry of maintenance when leasing.

And I'll keep saying it-it's not our place to tell someone what they can or can't afford. It doesn't sound like the OP is hard up, it sounds like he is trying to make the most out of a purchase.

 

I don't lease but maybe I would if I was in the trading mode often. You pay sales tax as you go and that could be like 35k in Tn on a new car. When people move in and out of cars, everyone whats to know the sticker price on the car. I haven't seen one post yet about sticker plus sales tax to evaluate the purchase.

 

You were lied to....or you misunderstood what they told you.

 

I am a former CFO so I do know the law. Here's the thing. Tax legislation was changed in order to specifically prevent rich people from picking an exotic as their business car and writing off a ton of expense. There are limits on the amount of depreciation for that reason. So you could spend 80k on a BMW or 500k on an exotic and still run up against the same ceiling.

Here's a decent explanation in somewhat laymans' terms.

https://home.kpmg.com/xx/en/home/insights/2016/04/tnf-rev-proc-2016-23-luxury-automobile-depreciation-limitations-for-2016.html

 

This topic reminds me of a local business owner back in the 80s he had created a nationally known company but for various reasons his personal life was a wreck...in any case during his
Bankruptcy hearing the judge asked him why he still had his Ferrari and his response was the code allowed him to keep one car so he figured that car might as well be a Ferrari....
as you can imagine the judge disagreed .... things started to go even worse from that point on...
his life was destroyed.....
as others say its all about perception there is ZERO tax benefit to a Ferrari lease or anything else Ferrari unless you are somehow in a Ferrari related business.....

 

Thank you for bringing this up. Bottom line it ain't worth it to deduct any cars. I advise clients to keep records and take the mileage deduction. Life is short.

 

Thank you for this

 

I've been told the same thing by multiple dealerships. While shopping for my last few cars I encountered this when the financing/leasing/cash topic came up and they realized I was self employed. They always asked if I'd like to lease it through my business "for the write-off.." and claimed that most of their clients do so. I actually know several people who do this, and have seen dozens of people talk about doing it on the forums. When pressed on how they've arranged it legally, I get crickets though.... Given that so many people do it and that the number of auditors is small and getting smaller, the odds of getting away with it are pretty good though.

 

A lot of people lease. For all kinds of reasons. I think Doug gave you great advice above. I agree with his take that you might be able to justify it if you have the right business but it will stick out in an audit. I think a lot of this comes down to your credibility to an auditor. If you are in a business that will be audited frequently, and you (or your representative) are now sitting across the table from an auditor, if you come across as piggish or just not believable on this, they are likely to carry that impression to other things as well. I think its one thing when you say you are using a Mercedes sedan for business. Its another when you say its a Ferrari....

I think the dealers get extra points from FNA if you lease via Ferrari Financial Services. I think if you are trying to build a profile or relationship with them, it MIGHT, be worth looking into. You could always lease for 1-2 years and then pay it off. However, I simply would not write it off. No one ever said you are forced to write off anything. So no one will care if you are not trying to take a tax benefit.

Interesting link for the changes, I have not read about it. If I read that link as I think it states, then this would be very damaging to the entire luxury automobile sector. I'm surprised they would do it.

The one comment I would take exception to is the one about if you have to lease it, you can't afford it. Thats just presumptuous. Leasing is just another form of financing. Some people opt to finance. Some people pay cash, but cannot afford to hold the car if the value drops by more than 5-10%. So they are often in and out of these cars. And some just like to flip. I think we shouldn't really judge. Just so long as it works for you.

 

You've only been told this so as not to scare you away.

If he had of said "most Ferrari buyers buy outright, no lease/loan" he is afraid that will scare you away.

 

The only advantage I have ever seen for leasing was to lease for a year and then buy out the lease and get an extra long CPO extension for the car, assuming that you plan to keep the car for a long period. But that was with a Porsche and it would end getting you about 10 years or 100k miles. Even given that I still can't see any real advantage to leasing (the lease is costing something vs paying cash) and have had this same discussion with my CPA several times.

I would guess that some exotic leased vehicles get written off substantially when they are owned by a Corp. that leases a large number of vehicles and the Corp. doesn't get audited. Should there be an audit it would be subject to all the restraints mentioned above and would not pass muster if caught by the IRA auditor.

 

Leasing is ok. Leasing in hopes of catching a tax break isn't such a good idea as already presented.

 

Do you or anyone you know have practical experience with this? Or is this a perpetuated myth? Genuinely curious. Thanks.

 

1. Business returns get audited more than non-business. (I'm including a Schedule C as a business.)

2. High income taxpayers get audited more than low-income taxpayers.

3. Businesses and high income taxpayers are more likely to write off expensive cars than other taxpayers.

Does this mean writing a Ferrari will automatically trigger an audit? No. But, if you get pulled, I can give you a 100% guarantee the examiner will go after your Ferrari.

If you going to play this game, be sure to keep excellent records proving non-commuting business use. Good luck.