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By leasing equipment you can stay one step ahead of technology, stay competitive, and streamline your operations. A lot of companies don't realize that leasing has tax benefits in addition to other benefits.
The IRS rules indicate that "if the lease agreement is a lease, the payments will count as rent." Though you should speak to your tax professional or CPA before taking action, here are a few common deductions that are available for equipment leasing.
Depreciation can be claimed on leased property if it's used to produce income. All operating leases qualify for this benefit, not just business equipment leasing. As long as the lease is classified as "operating," you are entitled to depreciate it at a rate that is deductible against the taxable income of the business. In addition, you can claim interest on the lease and any sales tax you paid on the equipment. It's obvious how beneficial these tax advantages can be when leasing equipment.
Count equipment lease payments as corporate income. The IRS will let you deduct those payments when you factor them into your taxable income. This is an excellent way to quickly offset any losses from other investments and keep cash flow levels at their peak.
Leasing offers another tax benefit since the full dollar amount of the equipment can be deducted, even if the payment hasn't been made in full. As an example, if you spent $5,000 on an asset that cost $10,000, but were only able to pay $2,500 this year because last year's taxes covered the rest, you can still claim the $5,000 deduction.
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You have three distinct options for tax incentives on equipment leasing. When you take out a loan on your company's assets and make steady payments throughout the year, you may be able to deduct interest expenses, but not lease payments applied to your principal balance. Alternatively, if you opt for an equipment lease agreement with monthly installments that factor into corporate income, there is no need to worry about writing off any of those costs because they are already accounted for in the agreed upon rate. Finally, when it comes to depreciation, interest, and operating expenses, you can write off 100% of what you owe (up to $2 million) as long as all qualifying criteria have been met by December 31st.
Whether a company needs working capital loans for equipment purchases, technology purchases, or for anything else their business may require, National Legacy Capital Group has the working capital loans they need to succeed. Fill out our 5-minute application or call one of our personal funding managers at (858) 345-6338 to find out if you qualify.
