Leasing costs
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Leasing costs
Deduct the lease payments incurred in the year for property used in your business.
If you lease a passenger vehicle, go to Vehicle leasing expenses.
If you entered into a lease agreement, you can choose to treat your lease payments as combined payments of principal and interest. However, you and the person from whom you are leasing have to agree to treat the payments this way. In this case, the Canada Revenue Agency considers that you:
- bought the property rather than leased it
- borrowed an amount equal to the fair market value (FMV) of the leased property
Enter this amount as follows:
- for business and professionals, enter the amount on line 9270, "Other expenses," in Part 4 of Form T2125, Statement of Business or Professional Activities
- for farmers, enter the amount on line 9790, "Other expenses," in Part4 of Form T2042, Statement of Farming Activities
- for fishers, enter the amount on line 9270, "Other expenses," in Part 4 of Form T2121, Statement of Fishing Activities
You can deduct the interest part of the payment as an expense. You can also claim capital cost allowance on the property.
You can make this choice as long as the property qualifies and the total FMV of all the property included in the lease is more than $25,000. For example, a combine or fishing boat, leased with a FMV of $35,000 qualifies. However, office furniture and vehicles often do not qualify.
To treat your lease this way, file one of these forms with your income tax return for the year you make the lease agreement:
- Form T2145, Election in Respect of the Leasing of Property
- Form T2146, Election in Respect of Assigned Leases or Subleased Property
If you need more information regarding the calculation of prescribed interest rates for loans, go to How to calculate prescribed interest rates for leasing rules.
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- Date modified:
- 2023-06-21