Leasing costs

Deduct the lease payments incurred in the year for property used in your business.

If you lease a passenger vehicle, go to Motor vehicle - Leasing Costs.

If you entered into a lease agreement after April 26, 1989, you can choose to treat your lease payments as combined payments of principal and interest. However, you and the person you are leasing from have to agree to treat the payments this way.

In this case, we consider that you:

• bought the property rather than leased it; and
• borrowed an amount equal to the fair market value (FMV) of the leased property.

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. Digging equipment that you lease with a FMV of $35,000 is property that qualifies. However, office furniture and passenger 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; or
• Form T2146, Election in Respect of Assigned Leases or Subleased Property.

Enter the amount on line 9270 - Other expenses of Form T2125, Statement of Business or Professional Activities.

Forms and publications

• Guide T4002, Business and Professional Income
• Form T2125, Statement of Business or Professional Activities
• Form T2145, Election in Respect of the Leasing of Property
• Form T2146, Election in Respect of Assigned Leases or Subleased Property

Related topics

• Line 9936 - Capital cost allowance
• Motor vehicle - Leasing Costs

Date modified:

2016-01-05