A vehicle you lease for business purposes has tax deduction benefits that are similar to the deductions you receive for purchased business vehicles. However, the fair market value of a leased business vehicle is used to determine the full extent of your deductible vehicle expenses. Depending on the fair market value and your business-use percentage, you may be eligible to deduct up to 100 percent of the vehicle lease payments in addition to other expenses you incur for the business use of the vehicle, such as insurance, fuel and maintenance.

Determine the fair market value of your vehicle for the year you first began using it for business. This information typically is found on your lease contract, but you may use outside sources, such as the Kelley Blue Book or the National Automobile Dealers Association, or NADA, to locate a fair market value for the vehicle.

Determine if the fair market value of the vehicle exceeds the inclusion values established by the IRS for the year you began leasing the vehicle. An inclusion applies if the fair market value of your vehicle is more than a fair market value established by the IRS. An inclusion is an amount you must subtract from your lease payment deduction for the business use of your vehicle and is calculated based on the amount your fair market value exceeds the IRS limits and your business-use percentage of the vehicle. Inclusion limits change periodically and are found in IRS Publication 463. If your vehicle is subject to inclusion, use the Inclusion Amount tables in the back of Publication 463 to calculate your inclusion.

Calculate the business-use percentage. Total all the miles you drive the vehicle during the year for all purposes and calculate the number of miles you drive the vehicle during the year for business purposes only. Divide the business miles by the total miles driven. The result is your business-use percentage. If the fair market value of your vehicle is subject to inclusion rules, you must multiply your inclusion by your business-use percentage to determine the amount to subtract from any business-related deductions for the vehicle.