Tax Advantages: Small Business Lease vs. Purchase

A small business lease can provide you with several tax advantages over making a purchase. Many businesses regularly debate the merit of leasing or purchasing a certain piece of equipment. Here are a few tax considerations to think about in this regard.

Tax Deductibility

One of the major benefits of leasing anything for your business is that you can treat it as an operating expense. Anything that is off the balance sheet like this will typically be 100% tax-deductible. This is not the case when you purchase equipment, as it will be considered an asset. However, when you lease something you can take advantage of deducting it on your taxes.


Another advantage of leasing is that you can speed up the depreciation on assets. When you purchase something, you have to depreciate it over the usable life of that particular asset. However, if you lease that product instead, you can depreciate it over the length of the lease term instead of the usable life. Therefore, if you take a three-year lease on something that has a five-year usable life, you can depreciate everything two years faster. In the grand scheme of things, this could amount to a substantial overall tax savings.

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