2018 Tax Law Small Business Auto Lease V Buy Calculator

Determine whether leasing or buying a vehicle is more tax-efficient for your small business under the 2018 tax law. This calculator compares the tax benefits of both options, helping you make an informed financial decision.

How to Use This Calculator

Enter your vehicle details and financial information to compare the tax implications of leasing versus buying. The calculator will show you which option provides greater tax savings under the 2018 tax law.

Note: This calculator assumes you're operating a small business and are eligible for the 2018 tax law provisions. Results may vary based on your specific circumstances.

Lease vs Buy: Key Differences

Leasing a vehicle offers several advantages for small businesses:

Lower upfront costs compared to purchasing
Tax deductions for business use
Flexibility to upgrade vehicles more frequently

Buying a vehicle has these benefits:

Potential for higher tax deductions in some cases
Full ownership of the vehicle
No monthly payments after purchase

Tax Savings Formula:

Tax Savings = (Lease Deduction - Buy Deduction) × Tax Rate

Tax Implications Under 2018 Law

The 2018 tax law introduced several provisions that affect business vehicle decisions:

Expanded Section 179 deduction for business vehicles
Bonus depreciation rules for certain vehicle types
New rules for lease deductions under Section 162

2018 Tax Law Provisions Summary
Provision	Lease Impact	Buy Impact
Section 179 Deduction	Limited to 100% of vehicle cost	Up to $1,050,000 for qualified vehicles
Bonus Depreciation	50% first year, 35% second year	60% first year, 40% second year
Section 162 Lease Deduction	Up to 50% of lease payments	Not applicable

Example Calculation

Consider a small business leasing a $50,000 vehicle with a 3-year lease term and purchasing a similar vehicle for $50,000. Using a 21% tax rate:

Lease Scenario:

Annual lease payment: $18,000
Section 162 deduction: $9,000/year
Total lease deductions: $27,000
Tax savings: $5,670

Buy Scenario:

Section 179 deduction: $50,000
Bonus depreciation: $30,000 (first year)
Total buy deductions: $80,000
Tax savings: $16,800

Result: Buying provides $11,130 more in tax savings under the 2018 law.

Frequently Asked Questions

Which option is better for tax savings?: The calculator compares both options based on your specific vehicle and financial details. In most cases under the 2018 law, buying provides greater tax benefits for small businesses.
Are there any limitations to the lease deduction?: Yes, the Section 162 lease deduction is limited to 50% of lease payments and only applies to business vehicles used for qualified purposes.
How does the 2018 tax law affect bonus depreciation?: The 2018 law increased bonus depreciation percentages for certain vehicles, which can significantly impact tax savings when purchasing a vehicle.
Can I use both the lease and buy options for different vehicles?: Yes, you can choose different options for different vehicles based on their specific tax implications and your business needs.
Are there any other tax considerations I should know about?: Yes, you should also consider fuel tax credits, sales tax deductions, and any state-specific tax rules that may apply to your situation.