Tax Savings

Tax Advantages of Equipment Leasing


The 2009 American Recovery and Reinvestment Act has officially extended the tax deduction increases under Section 179. Now is the time to take advantage of these tax incentives to get the equipment your business needs.

Leasing equipment can provide your company with substantial tax advantages you can't achieve when you pay cash or finance through a traditional bank. You will find that most successful small to medium size businesses take advantage of legal tax incentives in order to help lower their true cost of ownership on their business equipment.

Tax Code Section 179 Deduction
Under Section 179 businesses can deduct the full purchase price of equipment, up to $250,000 in 2009. There is also a one time bonus depreciation of 50% for equipment purchases that exceed $250,000 and are placed into service by December 31, 2009. The deduction begins to phase out dollar for dollar after $800,000, which makes Section 179 specifically designed to help small to medium size businesses acquire the equipment they need. Most types of business equipment qualify under this tax code provision including machinery, computers, software and office equipment. Learn just how much you can save in taxes by using our Tax Saving Calculator.



Section 179 Tax Savings Calculator *
Cost of the Equipment


Section 179 Deduction:
50% Bonus Depreciation Deduction (On any remaining amount above $250,000)
Regular First Year Depreciation Deduction:
Total First Year Deduction:
Cash Savings on your Equipment Purchase (assuming a 35% tax bracket)
Lowered Cost of Equipment after Tax Savings:


Equipment Leasing Tax Advantages

There are major tax advantages to leasing equipment depending on the type of lease you decide to choose:

Non-Tax Capital Lease

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 $250,000 on qualified equipment that is placed into service this year. In addition to the regular first-year depreciation, businesses can take advantage of a bonus depreciation of 50% on equipment purchases that exceed $250,000. 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 a Equipment Finance Agreement (EFA).

Tax Lease / True Lease

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.

* The lease calculator and tax example scenarioes are intended for estimate purposes only. The estimated tax savings may be based on assumptions that do not apply to your specific business tax situation. Please consult your tax advisor to determine the full tax implications of leasing equipment. Additonal information on business taxes can be found at www.irs.gov.

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