Q: I will be looking for a car soon. Someone told me that leasing is a tax effective option for self-employed. If I go on this route, how much of the monthly payment is recognized for tax purposes?
A: That is about as thorny as they get, and you are certainly not alone among my clients in asking it. Trouble is, until now leasing has virtually not touched the self employed, remaining almost exclusively in the realm of the fleet users, and for good reason (especially people who are not desperate for every bit of extra credit, since after all you are introducing a third party who also expects to make a profit - a good one - and somebody ends up paying for that).
Mr Hirschson has let it be known that he intends butchering what has been quite a milch cow for the State budget up to now because in his mind people have been getting away with unfair tax savings for the past decade and more, and let the chips fall where they may. Talk has been of as much as tripling the extra "salary" on which fleet drivers are taxed (still at rates of up to 61% even after Mr Netanyahu's controversial tax cuts). While not denying his figures (because if you think about it you will have to agree that they happen to be true), this will simply force the leasing companies into bankruptcy and eliminate the huge tax bonanza (direct and indirect) they have nevertheless created. It is not beyond belief that this could start a snowball effect with dire effects on the entire economy.
What does this have to do with the self employed? Very little, except that in a desperate attempt to stay in business the leasing companies will try to attract us to their door. Back in the nineties I was commissioned to do a major economic model to work out whether it made more sense to "lease or buy" and was astonished to discover that the rules as then applicable created a "no downside" situation for leasing, at least so long as you were sure (and who is) you could meet the payments throughout the period of the contract. In fact I almost never used the template I made out of it because the answer was so clear. But that was then, this is now, and if the new attitudes take root they will clearly not stop at the fleet user and I am still extremely dubious as to how the leasing companies can make themselves attractive in such a climate if you have the money available to buy the car outright or on an installment plan. As in all such cases I believe the lectures and articles starting to appear are premature and I can accordingly offer no serious advice or figures until the regulations pass (or don't, as the case may be - remember, Knesset members drive fleet cars).
