Are there any Tax Advantages to Leasing?

Should you lease or purchase your equipment? What tax advantages to leasing are available?

tax advantages to leasingRunning a business means taking advantage of every opportunity that comes your way in order to get ahead, all to get an edge on your competition. From getting the better hardware to getting a better location for your business, every little thing helps your business, allowing you to build as much of a profit as possible.

For many businesses, equipment is one of the more important parts of your company, and getting the best setup for your business hardware-wise is difficult but a necessity. Many businesses compare the benefits to purchasing their equipment versus getting an equipment rental; they want the best stuff possible for their company, but they don’t want to drain all their funds just to do so.

Having good equipment gives you a huge edge over your competition, especially in the case of companies like restaurants, farms, fitness centers, delivery businesses, and more. However, you need to determine what method of acquiring equipment is the best, because purchasing has its own advantages and disadvantages, but leasing is great as long as you get a good lease, which isn’t always easy to do.

Examining the pros and cons of leasing, is it worth it to lease hardware or buy it? Are there tax advantages to leasing? Is there an interest rate? What’s the overall breakdown fiscally?

How Purchasing Equipment Works

Many business owners love having the ability to buy their own equipment, because nothing feels better than owning every part of their business. Most of them aren’t a fan of having equipment they do not own because they don’t want to owe someone else something, but unfortunately buying normally leads to a bank loan, something business owners like to avoid.

This is especially the case when it comes to the heavier, more durable equipment, like a treadmill for example, something you’ll need a lot of but costs far too much to just pay for right out of pocket. Oftentimes business owners will just go through the process because they do get to claim equipment they purchase as an asset, giving them funds to partially pay for the equipment itself.

Still, most of the equipment is too much money for a startup business to handle, forcing a bank loan into play. Most equipment that you can afford without a loan gets placed in a common category amongst equipment: short-term.

Short-term equipment is hardware that either breaks for good or becomes outdated and irrelevant within a few short years, making the purchase pointless if you spent a good chunk of your money just to get the equipment.

Tax Advantages to Leasing

There are quite a few advantages to leasing your company’s equipment versus purchasing, but keep in mind that some leases can be detrimental to a business, which is why knowing how a lease works and what lease fits your company best is vital. A lease is a loan on a set of equipment to you but, instead of having to pay an interest rate, it’s all offered to you at a low, flat monthly rate, giving you an advantage with leasing versus a bank loan.

At the end of a loan, you can choose to either continue the lease and get upgraded equipment, purchase the equipment for a haggled price, or return the equipment and purchase your own elsewhere. The benefits in leasing include the fact that you can get your equipment upgraded or repaired on reasonable terms so you don’t have to pay a full price just to replace equipment that you already bought.

In addition, there are tax advantages to leasing as far as tax deductibles, putting money  in your pocket just by having a lease. There are quite a few upsides to leases, but you have to make sure that you get the best lease possible.

There are leases that will overcharge you, have contract periods that are far too long, and more; many of these are just set up for businesses other than yours, but you still need to be careful and have a set list of what you want from a lease. To learn more about the tax advantages to leasing, click here.

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