Yes, a taxi driver can claim mileage deductions on a leased car, but with a crucial difference compared to owning the vehicle. You must use the standard mileage rate method for the entire lease period if you choose to deduct mileage in the first year you use the car for business. This rule is set by the IRS to prevent double-dipping on deductions.
For the 2023 tax year, the standard mileage rate for business use is 65.5 cents per mile. This rate is designed to cover all operating costs, including depreciation. However, because you don't own the car (the leasing company does), you cannot also claim separate deductions for the car's depreciation.
If you're leasing, there's an additional rule called the "lease inclusion amount." For expensive vehicles (those with a fair market value exceeding a certain threshold set by the IRS), you must add a portion of the lease payment back into your taxable income. This reduces your overall deduction and is meant to offset the benefit you'd get from deducting mileage on a luxury car. The key is meticulous record-keeping. You need a detailed log of every business mile driven, the date, and the purpose of the trip.
| Tax Year | Standard Mileage Rate (Business) | Lease Inclusion Threshold (Example) | Potential Annual Deduction (15,000 miles) |
|---|
| 2023 | 65.5 cents/mile | $60,000+ | $9,825 |
| 2024 | 67.0 cents/mile | $61,000+ | $10,050 |
| 2022 | 58.5 cents/mile | $56,000+ | $8,775 |
The alternative is the actual expense method, where you deduct the business portion of your actual costs: lease payments, gas, insurance, repairs, etc. You can switch to this method later if you started with the standard rate, but it often involves more complicated record-keeping. For most taxi drivers using a leased car, the standard mileage rate is the simpler and more advantageous option, provided you understand the lease inclusion rule for high-value vehicles.
