The ability to lease equipment in industries such as healthcare and construction (for example) is an excellent way to preserve your working capital for overhead and daily business expenses. Additionally, there are tax implications with which you might have been unfamiliar. In the following, we’ll go through several of the tax benefits that accompany equipment leasing.
Leasing Equipment Can Save You Money
This saving comes by way of taxation. Normally when you buy anything, you’re employing your net after taxes have already been taking from revenue. However, when you lease, it is with your net income before taxes and the money you spend is legally accountable as a tax write-off since it’s a business expense. Since how much you may save depends on the tax bracket of your business (as well as your state of operation), always be sure to speak with a tax professional in such matters.
Tax Restrictions and Advantages
Although leasing certainly has its advantages on the front end – primarily, the ability to retain much more business capital for other expenses – it also has some drawbacks. When you outright purchase equipment, for example, you can take advantage of depreciation deductions allowed by the IRS. As the equipment ages, it will suffer a loss of value from its use, which translates to depreciation. When you opt for equipment leasing, you do not get to take the depreciation deduction since you don’t own the apparatus.
On the flip side, leasing can still help you with a specific equipment deduction in section 179 of the Tax Code. However, this deduction is only applicable for any assets purchased or leased within the initial year.
Consult with a Tax Professional About Equipment Leasing
Lastly, you are advised that tax law is hardly a static thing: what might have applied to equipment leasing tax exemptions in one quarter could be a tax liability in the very next one. Make sure you consult an expert to avoid any legal ramifications regarding loans and leasing. Contact Capital Finance Partners today to learn more about our equipment leasing packages.