The Tax Benefits of Leasing Equipment

Equipment leasing has become a common practice for numerous businesses. Not only does it improve cash flow in the short-term, but it also has some great savings in the long-term. When it comes time to pay your company’s taxes, you can take advantage of several incentives to save even more money. Before you purchase something outright, you should seriously weigh the tax benefits you get with leases.

One of the biggest benefits to be gained is with Section 179. This is a law that allows small business owners to write off the full price of an equipment lease. In this situation, many different items qualify. They include computers, machinery, vehicles, software and many other tangible goods that are used for the benefit of your business. The only other stipulation is that the lease has to be new to the business within that tax year. Additionally, this law only applies to small business owners, so taking advantage can really help your bottom line.

Another advantage of this option is that you do not have to pay off the lease in full within the tax year you are choosing the write off the equipment in. You may have bought a piece of machinery at the end of last year. Due to your lease agreement, you are not paying the full amount all at once. Instead, you pay a smaller amount every month for the length of the lease. However, since the lease began last year, you can write off the total cost on your taxes and utilize all the tax benefits available. This means you can get more in benefits than you have currently paid for the item.

Another qualification in order to get the benefits is that a small business must make less than $2,000,000 in purchases during the given year. If you purchase less than that amount, then you can write off as much as $500,000. Again, this benefit is designed for smaller businesses, so once you begin to make more than $2,000,000 in purchases, you no longer qualify. If any of this sounds confusing, then you should speak with your accountant to learn more about what purchases qualify.

There are numerous tax benefits out there for small businesses, so you want to be 100 percent positive you are utilizing as many as you possibly can. You do not want to leave any money on the table. Use Section 179 to its fullest extent, and you will be happy next time tax season comes around.


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