If your new car is a "true lease" (the ownership does not shift to you by the end of the lease period) then you should enter your old car in TurboTax as "Sold" not "traded in". It sounds like TurboTax is handling it as a trade-in and asking for Form 8824 for Like-Kind exchanges. Lease payments are entered as an expense and not depreciated as an asset. You might have to go back through the screens and enter your old car as a sale. The new leased car will not be entered as an asset. You will take the actual expenses for the new car, lease payments, gas, repairs, insurance etc.
Check your contract to see if your new car is a "true lease" or a "capital lease". When you go from a car you "owned" to a car you "lease", it is not considered a Form 8824 Like-Kind exchange. See below to determine if your lease could be a capital lease.
If your new car is a "lease" then technically you didn't "trade-in" your old car for IRS purposes. The problem could be if you answered you "traded in the old car" TurboTax might have guided you through the questions to put in the new one as an asset in Schedule C. Leased cars are not owned by you and not entered as assets in TurboTax.
The criteria for a capital lease can be any one of the following four alternatives:
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Ownership. The ownership of the asset is shifted from the lessor to the lessee by the end of the lease period; or
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Bargain purchase option. The lessee can buy the asset from the lessor at the end of the lease term for a below-market price; or
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Lease term. The period of the lease encompasses at least 75% of the useful life of the asset (and the lease is noncancellable during that time); or
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Present value. The present value of the minimum lease payments required under the lease is at least 90% of the fair value of the asset at the inception of the lease.
If a lease agreement contains any one of the preceding four criteria, the lessee records it as a capital lease. Ref. The
criteria for a capital lease
