Car leasing becomes even more attractive

If you're not sure whether it's better to buy or lease a car for use in your business, it's a no-brainer. You're much better off leasing. And new IRS rules this year make leasing an even better deal.

If you use your car exclusively for business purpose, you may deduct its entire cost of operation, including depreciation, subject to certain limits. If you use the car for both business and personal purposes, you may deduct only the cost of its business use. But there's a catch.

The tax law places a dollar limit on the amount of depreciation you can deduct each year. So you can't deduct all of the operating costs for a car used exclusively for business purposes if it's a "luxury car."

That's because the IRS believes that the cost of a "luxury car" is not an ordinary and necessary business expense and shouldn't be fully deductible. So you're only allowed to depreciate the cost of what the IRS considers an "ordinary" car, and the IRS says that for cars placed in service in 2002 (acquired & ready for use), an ordinary car costs no more than $15,500.The IRS will issue new figures for cars placed in service in 2003.Those figures may be identical or higher.