Equipment leasing provides an opportunity for you to stay one step ahead of technology, keep up with competitors, and streamline your operations. These are a few of the more commonly known advantages. What many companies are not aware of are the tax benefits that come with equipment leasing.
According to IRS rules, “If the agreement is a lease, you may deduct the payments as rent.” Though we recommend speaking with a tax professional or your CPA, here are a few tax benefits that may be available to you through equipment leasing.
You can write off most of your lease payments.
It’s important to know the difference between financing/loan tax advantages versus equipment leasing benefits. If you take out a loan on your equipment and make steady payments throughout the year, you’ll be able to write off the interest, but not the payments applied toward your principle.
On the other hand, equipment leasing enables a higher tax write-off, as you can cite your entire lease payment as a business expense.
Factor equipment lease payments into your corporate income.
Much like the purchase of a new computer or gasoline used for deliveries would count as a tax write-off, equipment leasing works the same way. If a manufacturing business leases new heavy machinery or if a radiology practice acquires a new MRI scanner through equipment leasing, the lease payments are deducted from your corporate income.
We bring this up because it’s easy to forget to deduct lease payments from your corporate income, as there is no huge down payment or diminished working capital.
Deduct the full dollar amount of the equipment, even if you haven’t paid in full.
This benefit is called a Section 179 tax deduction. See this website for more details about Section 179 tax deductions.
The main tax advantage to equipment leasing is the fact that you can write off the full amount of the equipment without paying the full amount. In this way, the amount you save in taxes may actually exceed the lease payments.
At Providence Capital Funding, Inc., we offer fast equipment leasing that allows you to take advantage of benefits without losing time, shuffling through financial paperwork, or waiting for approval on equipment leasing quotes. Our typical approval process from submittal is 4 hours.