Tax Consequenes of Small Business Equipment Leasing

Small business equipment leasing has the ability to greatly impact your tax liability. If you are a small business owner, leasing presents you with a few unique tax advantages. Here are some things to consider about how the taxes work on equipment leasing.

Tax Deductible

When you lease equipment, you are able to get a nice tax deduction from the IRS. With a lease that is considered Fair Market Value, you will be able to deduct the entire amount of the lease payments on your taxes. When you buy equipment, this is not the case. 


Another factor to consider in the tax implications is the depreciation. With a lease, you can often depreciate the asset faster than if you were to buy it. For example, let's say that the useful life of a piece of equipment is 5 years. If you were to buy that equipment, you would get to deduct it equally over 5 years. If you leased that same equipment for 3 years, you could take the entire deduction over that time span instead. 

Alternative Minimum Tax

The IRS has the right to use the alternative minimum tax on businesses that purchase too much equipment to lessen their tax liability. That does not apply if you lease the equipment. 

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