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Business equipment: Should you buy or lease?

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in Small Business Tax,Small Business Tax Deduction Strategies

The answer to the age-old question above depends on many factors, not just taxes. But now that first-year bonus depreciation deductions are a thing of the past (they expired after 2004), the pendulum has swung in a new direction.

Strategy: In today’s environment, leasing business equipment instead of buying it is often advantageous for tax and non-tax reasons. Here’s a closer look.

Tax benefits of leasing

When leasing, your company will typically use a fair market value lease (or a true lease). It gives you the option to return the equipment at the end of the term at no obligation. If you continue to use the equipment, you can renew the lease or buy the equipment at the going price.

With that kind of true lease, you can fully deduct your annual lease payments. That’s usually preferable to buying equipment, which generally results in multi-year depreciation deductions.

For example, a three-year lease can provide more tax bene...(register to read more)

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