Updated November 5, 2026. Quick answer: The Inclusion Amount Worksheet for Leased Listed Property in Publication 946 (2025) has 11 lines. Lines 1 to 5 figure Amount A, lines 6 to 10 figure Amount B, and line 11 adds them. You use it for leased listed property other than a passenger automobile in the first year the qualified business-use percentage is 50% or less, and the total goes on the same form or schedule where you took the rent deduction as other income.
When this worksheet applies
The publication says “If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less.” A leased car is handled elsewhere: “For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Pub. 463.” The qualified business-use percentage is the part of the property’s total use that is qualified business use, so the worksheet is a way to give back part of the rent deduction when the business share of the use falls.
Amount A and Amount B
“The inclusion amount is the sum of Amount A and Amount B”. Amount A multiplies three things: the fair market value (FMV) of the property, the business/investment use for the first tax year the qualified business-use percentage is 50% or less, and the applicable percentage from Table A-19. Amount B multiplies the FMV, the average business/investment use for all earlier years of the lease, and the applicable percentage from Table A-20.
On the FMV the publication says “The FMV of the property is the value on the first day of the lease term.” It adds “If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the FMV.”
There is a ceiling: “The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income.”
Lines 1 to 11 of the worksheet
Table A-19 and Table A-20 are in Appendix A of the publication and are not copied here: the percentage depends on the year of the lease and the recovery period, so read the row for your own lease. The line captions are:
| Line | What it asks |
|---|---|
| 1 | “Fair market value” |
| 2 | “Business/investment use for first year business use is 50% or less” |
| 3 | “Multiply line 1 by line 2” |
| 4 | “Rate (%) from Table A-19” |
| 5 | “Multiply line 3 by line 4. This is Amount A” |
| 6 | “Fair market value” |
| 7 | “Average business/investment use for years property leased before the first year business use is 50% or less” |
| 8 | “Multiply line 6 by line 7” |
| 9 | “Rate (%) from Table A-20” |
| 10 | “Multiply line 8 by line 9. This is Amount B” |
| 11 | “Add line 5 and line 10. This is your inclusion amount. Enter here and as other income on the form or schedule on which you originally took the deduction” |
A published example: Larry House
The publication’s first example is an item of listed property with an FMV of $3,000, leased for 5 years from February 1, 2023. Business use was 80% in 2023, 60% in 2024 and 40% in 2025, so 2025 is the first year the percentage is 50% or less. The item has a 5-year recovery period under both GDS and ADS, 2025 is the third tax year of the lease, the Table A-19 percentage is -19.8% and the Table A-20 percentage is 22%. Deductible rent for 2025 is $800.
| Line | Entry | Larry’s figure |
|---|---|---|
| 1 | Fair market value | $3,000 |
| 2 | Business/investment use for 2025, the first year business use is 50% or less | 40% |
| 3 | Line 1 multiplied by line 2 | $1,200 |
| 4 | Rate from Table A-19 (third tax year of the lease) | -19.8% |
| 5 | Line 3 multiplied by line 4, Amount A | -$238 |
| 6 | Fair market value | $3,000 |
| 7 | Average business/investment use for 2023 and 2024 | 70% |
| 8 | Line 6 multiplied by line 7 | $2,100 |
| 9 | Rate from Table A-20 | 22.0% |
| 10 | Line 8 multiplied by line 9, Amount B | $462 |
| 11 | Line 5 plus line 10, the inclusion amount | $224 |
The publication’s inclusion amount is $224, the sum of -$238 (Amount A) and $462 (Amount B). Recomputed here: $3,000 times 40% is $1,200 (computed); that times -19.8% is -237.6, which the publication prints as -$238 (computed); $3,000 times 70% is $2,100 (computed), and times 22.0% is $462 (computed); -$238 plus $462 is $224 (computed). The 70% on line 7 is the average of 80% and 60%. The $224 is below the $800 of deductible rent, so the ceiling does not cut it.
Lease beginning in the last 9 months of your tax year
A special rule applies when “The lease term begins within 9 months before the close of your tax year.” “You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year.” “The lease term continues into your next tax year.”
Then “Under this special rule, add the inclusion amount to income in the next tax year.” For the figures the publication says to use the average business/investment use of both tax years on line 2 and the applicable percentage for the year the lease term begins, and “Skip lines 6 through 9 of the worksheet and enter zero on line 10.”
The publication’s example is Julie Rule, who leased and placed in service 5-year property on August 1, 2024, with an FMV of $10,000. Her business use was 50% in 2024 and 90% in 2025, so the average is 70% (computed). With the year 1 percentage of 2.1% from Table A-19, $10,000 times 70% times 2.1% is $147 (computed), which matches the $147 the publication reports. Amount B is zero. She paid rent of $3,600 for 2024, of which $3,240 is deductible, so the ceiling is not a problem.
Lease for less than 1 year
The publication says “The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction.” “The numerator of the fraction is the number of days in the lease term, and the denominator is 365 (or 366 for leap years).” It also says “The lease term for listed property includes options to renew.”
The example is John Joyce, who leased 3-year property with an FMV of $15,000 on October 1, 2024, for a lease term of 6 months ending March 31, 2025, and used it 45% in business. Using 45% and the year 1 percentage of 2.1%, $15,000 times 45% times 2.1% is 141.75 (computed), and that times 183 over 365 is $71 (computed), the $71 the publication reports. Amount B is zero.
Where the total goes
“Report the inclusion amount figured (as described in the preceding discussions) as other income on the same form or schedule on which you took the deduction for your rental costs.” The publication adds “If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Schedule 1 (Form 1040), line 8z.”
Edition
This page reads Publication 946 (2025), How To Depreciate Property, the file irs.gov served on 2026-11-05 (sha256 in the kit data). Line numbers belong to that edition, so check the label printed on the worksheet in your own copy before you follow a line reference.
Common mistakes
- Using this worksheet for a leased car. The publication sends passenger automobiles to Pub. 463, chapter 4.
- Reading the same table for both rates. Line 4 takes its rate from Table A-19 and line 9 from Table A-20.
- Dropping the sign of the Table A-19 rate. Larry’s rate is -19.8%, so Amount A is negative.
- Filling in lines 6 to 9 when no earlier lease year exists, or in the late-lease case. In the Julie and John examples Amount B is zero.
- Letting the total exceed the deductible rent for the year. The publication caps the inclusion amount at that sum.
- Entering the result on a different form or schedule from the one that carried the rent deduction.
Related: Publication 946, Form 4562 Part V listed property, and Form 2106 vehicle expenses.
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Answer againSources
- Publication 946 (2025), How To Depreciate Property: https://www.irs.gov/pub/irs-pdf/p946.pdf
- IRS, About Publication 946, How To Depreciate Property: https://www.irs.gov/forms-pubs/about-publication-946
Read from the IRS documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.