Capital Lease

Discover The Tax Benefits Of A Capital Lease

Capital Lease Agreement

By now, if you have been trying to get a business started in today’s economy, you have probably been advised to lease purchase your equipment, rather than purchasing it from the start. Good advice, but we have an even better one for you: purchase all of your equipment through a capital lease agreement. Why? It is the best plan available, especially for cash strapped businesse and has some fantastic tax breaks especially designed for small business owners.

Want to know more about the budget and tax benefits of a capital lease? At Sun South Lease, we are experts at getting small businesses up and running for less, so call us today for an immediate consultation.

Why Do It?

Whenever you have to purchase any equipment in order to properly run your small business, it means having to lay out some considerable cash on your part, something that not all of us can readily afford. With a capital lease, you can still obtain the very same equipment, but instead of paying the full purchase price up front, you pay over time, with an equipment financing plan that you can afford.

Also, when you purchase equipment on your own, you will be solely responsible for any maintenance or replacement at some point, even if you do manage to get a reasonable warranty on it. With most equipment leasing agreements, that maintenance is covered by the leasing agent, and replacement is another option that is often included.

The average lease runs between one and five years for new equipment, and three years for used equipment and at the end of the lease term, you will often have the option to completely purchase the equipment for a very low purchase option, like a dollar. How can you beat that kind of a deal?

Tax Incentives and Benefits

In 2002, a new tax code, Section 179, was created to help small business owners be able to reinvest needed capital back into their business through the use of tax deductions particular to them, and the equipment they purchase for their business. This was made possible by allowing small business owners to claim any equipment purchases for that tax year as an additional deduction on their taxes. The maximum when the tax law went into effect was a hefty $25,000 and for many business owners, this was seen as a great benefit, especially since even items gotten through equipment leasing was defined as a purchase for tax purposes.

With the economic upheavals of the last few years, this tax benefit was expanded, making it a much greater incentive, especially for new businesses. The maximum for 2011, for example, was increased to $500,000, and a bonus deduction was added to cover depreciation costs! As long as the equipment in question is in house, and in operation, it counts. But, it will not last much longer, for in 2012 it drops to $125,000, and in 2013, it goes back to the original $25,000.