Equipment Leasing – 3 Tax Incentives That Make It Worth the While
Equipment leasing and financing offers less red tape than with bank financing. What a lot of small businesses don’t know, though, is that they can deduct the full purchase price of financed or leased equipment rather than make smaller deductions through depreciation over several years. This significant and immediate tax relief makes the option of leasing the business equipment you need a smart move to make before 2010 is out.
Section 179 of the IRS Tax Code allows businesses who have bought or leased qualifying equipment to deduct the entire purchase price from their gross income. So what are the best ways to make S179 work for you?
1. Lease the equipment you need now. S179 covers most types of business-related equipment, even software and other qualifying tangible goods like office machinery, supplies, computers and vehicles. This can prove to be a considerable boost to your cash flow and business profits.
2. Finance now without spending the full amount in the tax year. If you take the S179 deduction for a non-tax capital lease, you can make smaller payments during the tax year. This means you can buy and write off up to $250,000 worth of equipment without actually spending that full amount. In many cases, the tax savings will exceed the total of your first year’s payments.
3. Set up depreciation schedules for your assets. If your S179 depreciation expenses end up exceeding the annual limit, you can establish depreciation schedules for the assets or in some cases carry over the unused expense to succeeding tax years.
To take advantage of S179 for the 2010 tax year, you must lease or purchase equipment by December 31. The maximum amount than can be deducted for S179 (Federal) is $250,000, as long as total purchases of qualifying property don’t exceed $800,000. When a lease or purchase exceeds this maximum, then S179 is phased out dollar for dollar.