Inclusion Amount

AAA

DEFINITION of 'Inclusion Amount'

An additional amount of income that a taxpayer may have to report as a result of leasing a vehicle or other property for business purposes. The inclusion amount must be reported if the fair market value of the leased vehicle exceeds a certain threshold.

The inclusion amount is designed to limit the taxpayer's deduction amount to the amount that would be deductible as depreciation if the taxpayer owned the vehicle or equipment. This prevents the taxpayer from being able to deduct the entire amount of the larger lease payment versus the lesser amount of the depreciation.

BREAKING DOWN 'Inclusion Amount'

The inclusion amount will differ according to the type of property or equipment that is leased; the inclusion amount for cars is different than the rate applied to office equipment or computers. Car leases require that an inclusion amount be included for every year that a vehicle is leased, while other property needs an inclusion amount only if the business usage drops to 50% or less during the year.

RELATED TERMS
  1. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  2. Maximum Loan Amount

    Describes the maximum amount that a borrower can borrow. The ...
  3. Reversal Amount

    The amount of price movement required to shift a chart to the ...
  4. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  5. Proof of Charitable Contributions

    Substantiation required by the Internal Revenue Service for a ...
  6. Quid Pro Quo Contribution

    A charitable donation for which the donor receives something ...
Related Articles
  1. Bonds & Fixed Income

    Accounting Rules Could Roil The Markets

    FAS 142 is an accounting rule that changes the way companies treat goodwill. Be aware of the impact it has on reported earnings to avoid making bad investment decisions.
  2. Fundamental Analysis

    Understanding Pro-Forma Earnings

    These figures can either shed light on a company's performance or skew it. Find out why.
  3. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  4. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  5. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  6. Investing

    The Ins and Outs Of In-Process R&D Expenses

    Are these charge-offs fair accounting or earnings manipulation? Learn more here.
  7. Professionals

    Advisors: Warn Clients About These Audit Triggers

    There are several factors that may increase the risk of an audit, especially with high-net-worth clients.
  8. Taxes

    Employers: Don't Forget IRS Form 941

    Your obligations as an employer include various employment taxes. Use this form to report them.
  9. Taxes

    20 Medical Expenses You Didn't Know You Could Deduct

    To lower your tax bill, be sure not to miss out on these commonly overlooked medical tax deductions.
  10. Retirement

    How IRS Form 5498 Helps You

    If you have an IRA, you'll be getting this form. Here's the useful information it contains.
RELATED FAQS
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  2. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  3. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  4. How are write-offs recorded on my tax return?

    The way your write-offs are recorded on your tax return varies depending on whether you are filing a personal or business ... Read Full Answer >>
  5. How is the deductible I paid for my insurance claim treated for tax purposes?

    The deductible you pay on your health insurance policy may be tax-deductible if you meet certain conditions. However, whether ... Read Full Answer >>
  6. How can I tell which of my business expenses count as write-offs?

    Any basic, reasonably necessary expenses incurred in running a business can be considered possible write-offs. Such expenses ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!