Tax BenefitsJune 12, 2026 · 4 min read
Are Lease Payments Tax Deductible?
Operating lease payments can often be deducted as a business expense — here is the general picture.
For many businesses, the payments on a true operating lease (such as an FMV lease) can be deducted as an ordinary business expense in the year they are paid.
Operating vs. capital leases
The tax treatment depends on how the lease is structured. Operating leases are often treated as deductible rent; capital leases (like a $1 buyout) are treated more like a purchase, where you depreciate the asset and deduct interest.
Choosing with taxes in mind
The right structure depends on your tax situation and cash flow goals. This is exactly where comparing structures side by side pays off.
Tax treatment varies by structure and situation. Consult your tax advisor before deciding.
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