20a — Rent or Lease -- Vehicles, Machinery, and Equipment Updated for tax year 2025

What this line means

Lease or rental payments for vehicles, machinery, and equipment used in your business. This includes car leases (business-use portion only), equipment rental, tool rental, and machinery leases. If you lease a vehicle, you deduct the business-use percentage of the lease payments here. Do not include lease payments for office space or buildings — those go on line 20b.

Does this apply to you?

• You lease a vehicle and use it for business
• You rent heavy equipment, tools, or machinery for business projects
• You lease office equipment like copiers or postage meters
• You rent specialized equipment on a short-term basis for specific jobs

Easy to overlook

Leased vehicle deduction requires business-use percentage If you lease a car and use it 60% for business, you deduct 60% of the lease payments on line 20a. The remaining 40% is personal and not deductible. You cannot use the standard mileage rate and also deduct lease payments — pick one method. If you choose to deduct actual expenses including lease payments, you must track your business-use percentage. ¹ [SOURCE: IRS Publication 463 — Travel, Gift, and Car Expenses]

Lease inclusion amount for expensive vehicles If you lease a vehicle with a fair market value above a certain threshold (adjusted annually), you must reduce your lease deduction by an “inclusion amount” found in IRS tables. This prevents taxpayers from using leases to circumvent the depreciation limits on luxury vehicles. The inclusion amount is small but required. ² [SOURCE: IRS Schedule C instructions — Line 20a]

Watch out for this

Deducting the full lease payment for a vehicle used partly for personal purposes. If your car is used 70% for business, only 70% of the lease payment is deductible. The IRS expects you to know and apply your business-use percentage.

Related lines on your return

• Line 9 — Schedule C — Car and truck expenses; mileage deduction goes there, not here
• Line 20b — Schedule C — Rent on other business property; office or building leases go there
• Line 13 — Schedule C — Depreciation; for equipment you own, not lease