In 2008, if a car with a fair market value in excess of approximately $18,500 is leased ($19,000 for trucks), you must add back an additional amount (i.e., subtract it from your otherwise deductible amount) to offset a portion of the lease payments. This rule was enacted to prevent individuals from avoiding the luxury car depreciation limits that apply to purchased vehicles. The amounts that must be added into your income are called "inclusion amounts" and are taken from a price-based table issued annually by the IRS.

For many small business owners, buying a reliable used vehicle to use in their business makes more sense than buying a new one. By doing so, a business owner can save thousands of dollars on a vehicle's purchase price. That money can be used in other areas of the business that will generate profits. However, a used vehicle that constantly breaks down may interrupt service to customers. And depending on the nature of your business, a shabby looking vehicle that runs could still leave an unfavorable impression with your clients.

Should a theft, fire, or other catastrophe hit your business, you'll want to quickly and accurately determine what you've lost. You'll be aided in making this determination if you've taken the time to document each of your equipment acquisitions. Good records of what you've purchased can also help when things are going well. Accurate information regarding your past equipment purchases can help you forecast your future needs.

If you are an employer and you provide a vehicle to an employee for an entire year, you may value the use of that vehicle (a fringe benefit to your employee) by using the vehicle's annual lease value. A vehicle's annual lease value is based on the fair market value of the vehicle when it is first available for personal use and is determined under an annual lease table provided by the IRS. The table is based on a four-year lease term. The attached file contains the annual lease table as well as an example which shows how to use the table to value an employee's use of a vehicle.