Car lease payments belongs on Line 20a, rent or lease of vehicles, machinery and equipment.
Why line 20a
Schedule C prints a line for renting or leasing vehicles, machinery and equipment, and that is line 20a, so a monthly car lease payment goes there rather than on line 9. Only the business-use share is deductible, and only if you are using the actual expense method for that vehicle. If you choose the standard mileage rate for a leased car you deduct miles instead and the lease payments are not deducted at all, and that choice has to hold for the entire lease term.
On the printed form this is line 20a. Line 20 is the total of 20a and 20b, so a worksheet that reports one line 20 figure is adding the two together.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so car lease payments lands on Line 20a without you sorting it.
Start for freeWhat car lease payments is confused with
- Line 9, car and truck expenses
- The lease payment goes on line 20a; the fuel, insurance, repairs, parking and tolls for that same leased vehicle still go on line 9.
- Form 4562, form 4562, carried to schedule c line 13
- A true lease is rent on line 20a; a lease-to-own or conditional sale contract is a purchase in substance, so it is depreciated on Form 4562 instead.
Examples that belong on line 20a
- $389 a month on a leased SUV used 80 percent for business, deducted at 80 percent
- A $2,400 capitalized cost reduction spread over the lease term
- $450 a month on a van leased entirely for a courier route
- A $595 lease acquisition fee spread over the term
What does not belong here
- Lease payments entered on line 9, which is where the running costs go
- Lease payments claimed alongside a standard mileage deduction for the same car
- The full payment on a car also used for family driving
- A lease-to-own contract treated as rent
The limit that applies
A lease inclusion amount reduces the deduction when a leased vehicle's fair market value at the start of the lease exceeds a threshold the IRS publishes each year in a revenue procedure. Advance payments are spread over the lease term rather than deducted when paid.
What to keep
Keep the lease agreement showing the term, the payment and the vehicle's fair market value at the start of the lease, because that value is what decides whether an inclusion amount applies.
Other expenses on line 20a
| Expense | Line |
|---|---|
| a leased copier or printer | Schedule C, Line 20a |
| a leased trailer | Schedule C, Line 20a |
| a leased vehicle | Schedule C, Line 20a |
| a rented dedicated server | Schedule C, Line 20a |
| equipment and tool rental | Schedule C, Line 20a |
Related lookups
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so car lease payments lands on Line 20a without you sorting it.
Start for free