Is leasing a car worth it for mystery shopping?
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johnb974! (I was thinking Beetlejuice three times in my head!)
After a quick Google search, this came up:
[www.irs.gov].
Question
If I lease a vehicle, can I deduct the cost of the lease payments plus the standard mileage rate?
Answer
If you lease a car you use in business, you may not deduct both lease costs and the standard mileage rate. You may either:
Deduct the standard mileage rate for the business miles driven. If you choose this method, you must use the standard mileage rate method for the entire lease period (including renewals).
Claim actual expenses, which would include lease payments. If you choose this method, only the business-related portion of the lease payment is deductible.
An income inclusion amount reduces both of these deductions.
After a quick Google search, this came up:
[www.irs.gov].
Question
If I lease a vehicle, can I deduct the cost of the lease payments plus the standard mileage rate?
Answer
If you lease a car you use in business, you may not deduct both lease costs and the standard mileage rate. You may either:
Deduct the standard mileage rate for the business miles driven. If you choose this method, you must use the standard mileage rate method for the entire lease period (including renewals).
Claim actual expenses, which would include lease payments. If you choose this method, only the business-related portion of the lease payment is deductible.
An income inclusion amount reduces both of these deductions.
@johnb974 wrote:
Do you write off the amount for leasing and mileage?How does the IRS know if you're using it for business or personal use?
You never fail to impress me with your humorous tax questions.
So, CA, cheapest lease is probably $300 a month?
Insurance maybe $150 a month?
Registration maybe $500 a year?
Are you going to declare enough income for this to make sense?
Now answer my second question. How does the IRS know how you're using the car? Depending on the lease,you can lease for less then $300. Everything is still a write off.
Edited 1 time(s). Last edit at 09/29/2024 07:43PM by johnb974.
Edited 1 time(s). Last edit at 09/29/2024 07:43PM by johnb974.
@johnb974 wrote:
Now answer my second question. How does the IRS know how you're using the car? Depending on the lease,you can lease for less then $300. Everything is still a write off.
Kind of like cheating on your spouse, they don't know until they catch you. Then it's not pleasant. Of course there is the matter of ethics in both situations, but it doesn't seem like that is a concern for you, so hey, you do you!
Also, you're a troll, right? No one legitimately comes up with this crap over and over.
Now answer my second question. How does the IRS know how you're using the car?
You tell them because you're an honest person.
You tell them because you're an honest person.
I think you have to allocate it between personal versus business use, and then prorate accordingly. That's sort of why I personally don't like go through the trouble of trying to expense/deduct smartphones and utilities. I'm due for a new phone though, and it may be worthwhile for me crunch the numbers in this case though.
I'm not sure what the audit numbers and stats are these days, but yes, be truthful and have records as back-up. I have former co-workers and friends who own small businesses that heavily operate with cash and/or own rental properties, where they have been audited.
I'm not sure what the audit numbers and stats are these days, but yes, be truthful and have records as back-up. I have former co-workers and friends who own small businesses that heavily operate with cash and/or own rental properties, where they have been audited.
Leasing a car that you can prove is exclusively used for MS is probably deductible, but it might still trigger an audit. If you split between personal and business use (other than to deduct business mileage) and try to do a percentage it's all but guaranteed to trigger an audit, especially if you're not a billionaire.
How does the IRS know your using something for business? You would keep track of your mileage and lease payments to submit as part of your unreimbursed business expenses. Are they 100% certain that you are being truthful? Probably not. A business car can also have some weekend use.
It's only worth it to have a separate car for business if you actually make enough to justify it as a business expense and not more of mystery shopping hobbyist making very part time wages. If you are constantly operating at a loss or making very little in wages while reporting high relative losses, that seems more likely to trigger an audit.
Please consult with a tax specialist or tax attorney. And best of luck!
It's only worth it to have a separate car for business if you actually make enough to justify it as a business expense and not more of mystery shopping hobbyist making very part time wages. If you are constantly operating at a loss or making very little in wages while reporting high relative losses, that seems more likely to trigger an audit.
Please consult with a tax specialist or tax attorney. And best of luck!
To begin with, it's not to job of the IRS to decide if you used the car for business purposes, it's your responsibility to show proof when asked if you are taking the write off. So...it's on you, not them. How do you show that proof?
Many people do that by having a second car for personal use, which is the simpler approach. Otherwise, they expect you to keep exacting records of when/how the vehicle was utilized and reimburse the business for your personal use of the vehicle, so the mileage deduction is a much simpler process as write-offs go.
Many people do that by having a second car for personal use, which is the simpler approach. Otherwise, they expect you to keep exacting records of when/how the vehicle was utilized and reimburse the business for your personal use of the vehicle, so the mileage deduction is a much simpler process as write-offs go.
I'd be surprised if you could find a $300 lease with enough of a mileage allowance to shop full-time.
Have synthesizers, will travel...
Yes and that would be $300 offset every month , not just a month when you did a lot of trips for shopping. And to add to the comments about how the IRS knows you used the car exclusively I also want to point out that if you decide to take a cross country trip in the car and take a shop in NYC which is 3000 miles away from California so you can charge your 6000 miles round trip as mileage on that shop (or even a bunch of one off shops that are all hundreds of miles away) the IRS may contact you about that too.
quote=CoolMusic]
I'd be surprised if you could find a $300 lease with enough of a mileage allowance to shop full-time.[/quote]
quote=CoolMusic]
I'd be surprised if you could find a $300 lease with enough of a mileage allowance to shop full-time.[/quote]
They won't know, unless you are audited, in which case it will be up to you to document your business miles. Then they will know.
A car lease payment is part of the itemized auto business expense deduction. Its not super complicated. You enter how many total miles you drove all year, and how many of those miles were for work (which most of us would consider MS work, but John you consider it a hobby so this whole post is sort of moot...). You then enter your expenses (lease, gas, insurance, maintenance, etc) and your tax software will come up with the appropriate deduction amount.
If you enter 100% of the use is for work (or in your case, paid hobby), and you indicated that you have another car available for personal use (which is also a tax software question in the deductions section), its unlikely to be an audit trigger. If you indicate no other personal car available, it would likely be an audit trigger.
If you enter 100% of the use is for work (or in your case, paid hobby), and you indicated that you have another car available for personal use (which is also a tax software question in the deductions section), its unlikely to be an audit trigger. If you indicate no other personal car available, it would likely be an audit trigger.
I have a feeling that johnb974 may not be using tax software (Playful joke)@Cassiespark wrote:
You then enter your expenses (lease, gas, insurance, maintenance, etc) and your tax software will come up with the appropriate deduction amount.
I looked into leased cars several years ago. Basically it is treated almost exactly like a car you own, minus the depreciation part. You can choose mileage or actual expenses
@sandyf wrote:
Yes and that would be $300 offset every month , not just a month when you did a lot of trips for shopping.[/quote
You totally missed my point.
You are not going to get a $300 lease (parameter set by the OP) on a reliable car without a restrictive mileage allowance being part of it.
Which means you can't effectively use the car for MS work without incurring a penalty for going over the allowance.
Can you take the mileage deduction on your taxes or write off a portion of your lease payment(s) based on percentage of usage?
Yes, but that's after the fact, and your budget will have been severely blown in the meantime.
Have synthesizers, will travel...
@CoolMusic wrote:
''@sandyf wrote:
Yes and that would be $300 offset every month , not just a month when you did a lot of trips for shopping.[/quote
You totally missed my point.
You are not going to get a $300 lease (parameter set by the OP) on a reliable car without a restrictive mileage allowance being part of it.
Which means you can't effectively use the car for MS work without incurring a penalty for going over the allowance.
Can you take the mileage deduction on your taxes or write off a portion of your lease payment(s) based on percentage of usage?
Yes, but that's after the fact, and your budget will have been severely blown in the meantime.
I have no idea how John will be using the car, whether strictly for mystery shopping or as his only car for shopping and for himself. And I really doubt that he will be earning enough, or doing enough mystery shopping to be able to write off the amount of the lease (whether that be by taking miles off at this years rate per mile or whether he deducts the lease cost using the auto business expense deduction. I can see him driving 1000 or so miles for mystery shopping in a month if he is an active shopper but if he uses the flat rate per mile deduction to offset his lease amount in his mind. than he still has to pay for gas above the amt he has used to pay for the lease. ( I will spell that out (John decides to offset the lease amt for mystery shopping so he figures out his total deduction as 1000 miles per month for the flat rate amt giving him a deduction of $670 per month. He can annualize that to be over $8,040. On a monthly basis he takes off in his mind $300 for the lease so that leaves him $370 he can use to pay for gas and other maintenance and insurance he may have on a leased car.) I am not at all sure what your point is that you think I missed, Or was it John who missed the point. What deal he might have on a leased car I have no idea if that is your point. Perhaps he is leasing it with unlimited miles thru some deal. In any case from many of the queries John has made I believe that he might actually take a cross country trip, do a few jobs here and there and charge the entire mileage whether in his own car or a leased car, it does not matter. I do not see him as an every day route shopper now but perhaps he wants to do that with his car.
John's original question was whether he can write off the mileage plus the lease amt. I think that has been answered already. But if he thinks that his other costs like insurance etc can be paid by the flat mileage deduction including the lease than he can probably do it that way. It would be easier in a state with less expensive gas.I have never leased a car before but if you don't pay for tires, oil changes and breakdowns it probably is doable. I suspect tho there are maintenance expenses you do pay for on a lease and you prob need more than the basic insurance too.
Or you just dont report them. Not that any of us would do that.
Edited 1 time(s). Last edit at 10/01/2024 02:34AM by wrosie.
Edited 1 time(s). Last edit at 10/01/2024 02:34AM by wrosie.
Think of it like an HSA. I withdraw money from my HSA to pay for my dentist. I take the deduction in the amount of my dental bill. The IRS doesn't know for sure that it was really for my dental bill until they ask for my receipts....so my advice, make sure you have the backup proof.
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