J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

43.12 Leased Business Vehicles: Deductions and Income

If you lease rather than purchase a car, truck, or van for business use, you may deduct the lease charges as a business expense deduction if you use the vehicle exclusively for business. If you also use the vehicle for personal driving, you may deduct only the lease payments allocated to business travel. Also keep a record of business use; see 43.11.

Added income.

If in 2012 you lease a vehicle for 30 days or more, you may have to indirectly report as income an amount based on an IRS table. This income rule applies if you deduct the business portion of your lease payments plus other operating costs; it does not apply if you claim the standard mileage allowance (43.1). On Schedule C (if self-employed) or Form 2106 (if an employee), the income inclusion amount reduces your deduction for lease payments similar to the way your depreciation deductions would have been limited if you had bought the vehicle outright. The income amount is reduced where you leased the vehicle for less than the entire year or business use is less than 100%.

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Caution

Leased Vehicle

If in 2012 you leased a car, truck, or van for at least 30 days and you deduct the lease charges as a business expense (43.12), you generally must reduce the deduction by an “income inclusion amount” based on an IRS table. If you claim the standard mileage ...