Non-Tax Capital Lease Deductions
The main benefit under a non-tax capital lease is that it can take full advantage of Section 179. Under this tax code provision the government allows small business tax payers the ability to write off up to $25,000 on qualified equipment that is purchased and placed into service this year. Through Section 179 a business can significantly lower the true cost of equipment ownership. Examples of non-tax capital leases include a $1.00 Buyout, 10% Purchase Upon Termination (PUT) and Equipment Finance Agreement (EFA). Apple Capital offers many types of equipment leasing structures that you can choose from.
Tax Lease/True Lease and Section 179
With a tax lease such as a fair market value (FMV) lease, the lessor retains ownership and as the lessee you can expense the monthly lease payments in the period they are paid as a general operating expense. In most cases the entire lease payment can be fully deductible. For example: Suppose the monthly investment is $2,000 and the term is 36 months (3 years). Assuming a 35% tax bracket, the monthly tax savings would be $2,000 x .35 = $700. Which means the total tax savings over the term of the lease contract would be $700 x 12 months x 3 years = $25,200.