Leasing a vehicle for business: deductions and the lease inclusion amount
The lease deduction is simpler than depreciation. But for expensive vehicles the IRS makes you give back a small part of it, called the inclusion amount. At $62,000 or less there is generally nothing to include for a lease that starts in 2026.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 20, 2026.
What you can deduct
- With actual costs, the business share of each lease payment. You cannot deduct the part for personal use, such as commuting.
- Advance payments, such as a payment at signing, are spread over the whole lease.
- Payments you make to buy the vehicle are not lease payments, even if the contract calls them that.
- Or the standard mileage rate: if you choose it, you must use it for the entire lease, including renewals, and you cannot deduct the lease payments.
When the inclusion amount applies
If you lease a vehicle for 30 days or more, and its fair market value on the first day of the lease is more than the threshold below, you reduce your lease deduction each year by an inclusion amount. This works like the cap on depreciation for a vehicle you own. If the vehicle is worth less than the threshold, you have no inclusion amount at all.
| Year the lease began | Inclusion amount applies if the value is over |
|---|---|
| 2024, 2025 and 2026 | $62,000 |
| 2023 | $60,000 |
| 2022 | $56,000 |
| 2021 | $51,000 |
| 2018 to 2020 | $50,000 |
How to figure it
Find the value
Use the fair market value on the first day of the lease. If the lease states the capitalized cost, use that.
Find the dollar amount
In the IRS table for the year the lease began, find the row for the value and read across to the column for each tax year of the lease. For the last tax year of the lease, use the dollar amount for the preceding year.
Prorate it
Multiply by the number of days of the lease that fall in that tax year, divided by the days in the year.
Apply your business use
Multiply by the percentage of business use for the year. The result is the inclusion amount.
Reduce the deduction
Subtract the inclusion amount from your lease deduction for that year.
The 2026 table (leases that began in 2026)
Dollar amounts from IRS Rev. Proc. 2026-15, Table 3, for vehicle values up to $110,000. For higher values, see the full table in the Rev. Proc. For leases that began in an earlier year, use that year's table.
| Value over | But not over | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 and later |
|---|---|---|---|---|---|---|
| $62,000 | $64,000 | $8 | $15 | $21 | $25 | $27 |
| $64,000 | $66,000 | $19 | $38 | $56 | $66 | $76 |
| $66,000 | $68,000 | $29 | $62 | $91 | $108 | $123 |
| $68,000 | $70,000 | $40 | $86 | $125 | $149 | $172 |
| $70,000 | $72,000 | $51 | $109 | $160 | $191 | $220 |
| $72,000 | $74,000 | $61 | $133 | $195 | $232 | $268 |
| $74,000 | $76,000 | $72 | $156 | $230 | $274 | $316 |
| $76,000 | $78,000 | $83 | $179 | $265 | $316 | $364 |
| $78,000 | $80,000 | $93 | $203 | $299 | $358 | $412 |
| $80,000 | $85,000 | $112 | $244 | $360 | $431 | $496 |
| $85,000 | $90,000 | $139 | $302 | $447 | $535 | $617 |
| $90,000 | $95,000 | $166 | $361 | $534 | $639 | $737 |
| $95,000 | $100,000 | $192 | $420 | $621 | $743 | $858 |
| $100,000 | $110,000 | $232 | $507 | $752 | $900 | $1,038 |
Example (numbers made up)
You lease a vehicle on March 1, 2026 for 36 months. Its value is $70,000 (the row from $68,000 to $70,000), you pay $1,000 a month, and you use it 80% for business.
| Tax year | Dollar amount | Days in the lease | Business use | Inclusion amount |
|---|---|---|---|---|
| 2026 | $40 | 306/365 | 80% | $27 |
| 2027 | $86 | 365/365 | 80% | $69 |
2026 deduction: ten payments of $1,000 times 80% = $8,000, less $27 = $7,973. 2027 deduction: twelve payments times 80% = $9,600, less $69 = $9,531. At this value the inclusion amount is small. For comparison, buying a car of 6,000 pounds or less at the same price would have a 2026 first-year cap of $16,240 at 80% business use.
Other points
- If you change a leased car from business to personal use, or the other way, special rules apply to the inclusion amount. See Publication 463.
- Early termination, buy-out and end-of-lease charges vary by contract. Ask before you sign.
- In Illinois, lease transactions have their own state tax forms (RUT-25-LSE and ST-556-LSE), handled with the dealer when the vehicle is titled. See the compliance checklist.
Common questions
What is the lease inclusion amount, in plain English?
A small reduction of your lease deduction that applies only when the vehicle is expensive. It keeps a lease from being much more generous than buying an expensive vehicle, where depreciation is capped.
Does it apply to my lease?
Only if the vehicle's fair market value on the first day of the lease was above the threshold for the year the lease began ($62,000 for a 2026 lease), and you deduct lease payments with the actual-costs method. If your lease contract states a capitalized cost, use that as the value.
Does it apply to heavy trucks and SUVs?
The IRS tables are for "passenger automobiles," which includes light trucks and vans. Vehicles rated over 6,000 pounds that are outside the passenger-automobile rules are generally not subject to it. Confirm the rating of your vehicle.
Is there an inclusion amount for a short lease?
The rule applies to leases of 30 days or more. A lease term shorter than 30 days has no inclusion amount.
What if I choose the standard mileage rate?
Then you do not deduct the lease payments, so there is nothing to reduce. But you must use the mileage rate for the whole lease period.
Official sources
- IRS Rev. Proc. 2026-15: 2026 depreciation caps and lease inclusion table
- IRS Rev. Proc. 2025-16: 2025 depreciation caps and lease inclusion table
- IRS Publication 463: Travel, gift, and car expenses
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