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Four
Ways To Reduce Your Tax Liability...With Leasing!
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Take
A $250,000 Deduction!
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IRS
Section 179
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| Under
this IRS program, a business entering into a Capital Lease may deduct up
to $250,000 in accelerated depreciation from their taxable calendar year
2008 income for acquired equipment. A very special advantage of this
program is that the business does not have to spend $250,000 this year to
claim the deduction this year! The only requirement is to enter into
the lease agreement and take delivery of the equipment during the calendar
year in order to be eligible to claim the full deduction. |
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100% Tax
Deductible Payments
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Fair
Market Value Leases
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The
key component of an operating lease is that the lessee has the option to
return the equipment at the conclusion of the lease--without further
obligation. The lessee may also have the option to purchase the
equipment for its fair market value or to continue leasing the equipment
from the lessor. The lessee does not record the equipment as an
asset on its balance sheet, nor does the lessee record a long term
liability. The lease is generally treated as an off-balance sheet,
operating expense and is, therefore, 100% Tax deductible. |
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Accelerate Your Depreciation
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Lower
Your Tax Liability
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| With
a cash, bank loan or capital lease, you normally recapture some of your
cash expenses by claiming depreciation on the equipment according to the
IRS accepted "useful life" of that equipment, which can be as
long as 7 years. You may also claim the interest portion as an
expense during the term of any repayment. The same equipment on an
operating lease can be fully expensed during the lease term, which is
typically a shorter term than the IRS "useful life". |
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Avoiding the AMT "Double Tax Whammy"
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The
Lease Strategy
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Under
the Tax Reform Act of 1986, Congress took aim at small to medium sized
businesses that had been reducing their overall tax liability by claiming
depreciation on equipment they had acquired. Although the subject is
rather complex, the net effect is that companies who have used equipment
depreciation to significantly lower their tax liability are subject to a
review that may have the effect of classifying some of those depreciation
write-offs as "tax preferences" and subjecting those same
companies to an additional "Alternative Minimum Tax," in
addition to the taxes they would otherwise owe. Owning or purchasing
too much equipment, while lowering the traditional tax component, can now
trigger the addition of new added taxes. The good news: Equipment
lease payments that are treated as rentals do not qualify as tax
preference items and have no adverse effect on AMT liability.
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*
NOTE: Always consult an accounting professional on these and other tax
matters. |
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