What are the tax advantages to leasing versus financing?

As it relates to excise tax in Massachusetts or personal property tax in Rhode Island, there are no tax advantages one way or the other. However, there is an advantage in sales tax. When you finance or buy outright, you have to pay all of that non-tax deductible sale sales tax up front. When you lease, you pay sales tax as you consume the vehicle. So if you put money down you pay sales tax on that and you pay sales tax on the monthly payment. Therefore you are deferring the payment of the tax. In addition, if you have “business use” of your vehicle as defined by the IRS, You should be able to reduce your taxable income by a much higher percentage of your actual out of pocket expense if you lease than if you finance or buy outright.

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