1040-US: Entering lease inclusion amount for a vehicle

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Per Publication 463, Travel, Entertainment, Gift, and Car Expenses, if you lease a car that you use in your business for a lease term of 30 days or more, you may have to include an inclusion amount in your income for each tax year you lease the car. To do this, you do not add an amount to income. Instead you reduce your deduction for your lease payment. (This reduction has an effect similar to the limit on the depreciation deduction you would have on the car if you owned it.)

You can generally use the actual cost method of computing your vehicle expenses. Then, you can deduct each lease payment as a rental expense. However, when business use of a leased vehicle is < 100 %, the rental deduction is scaled down in proportion to the personal use.

Follow the steps outlined below to enter information in UltraTax CS for leased vehicles.

  1. Select the Asset tab in the applicable activity folder.
  2. Click Add to add a new asset or modify an existing one.
  3. Enter the Description and Date in service.
  4. Access the Vehicle/Listed tab, and select the applicable property type from the Type of property fieldview. See Descriptions of Vehicle / Listed Property Types for property type definitions.
  5. Click Form 4562 Vehicle Questions, and answer the questions, then click OK.
  6. Select Actual costs, and enter any applicable expenses at 100%.
  7. Click Lease Inclusion to enter applicable information for UltraTax CS to calculate the lease inclusion amount. Note that this button is only available for the following types of property: Luxury auto (Passenger), Van or light truck, and/or Electric vehicle. If one of these options is not selected in the Type of property fieldview, then you will need to manually calculate the lease inclusion amount and adjust it for the business use percentage.
  8. Enter any lease payments in the Vehicle Rentals field.
  9. Click Done to record this information.

Note: UltraTax CS automatically generates an Auto Worksheet for each activity, except Form 2106 because Form 2106 already contains the auto information. This worksheet provides an audit trail for the vehicle(s) entered. The worksheet is located in Forms View under the Auto folder.

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