Tax codes and buying decisions are complex, no doubt, but when deciding it’s time to purchase equipment, leasing is an alternative to purchasing that can make good business sense.
The benefits of leasing
The true benefit of leasing equipment comes from operation—not ownership. While lowering your tax liability is a benefit you can also improve your efficiency and increase your cash flow. Moreover, you can lease the brand of equipment that is best for you, replacing as required so you can take advantage of the latest models, fuel efficiency, and low-maintenance.
Leasing is a flexible way to help you control cash flow. Typically, you can adjust the length of term, frequency of payments, and residual value of the equipment at lease end. Leasing solutions offer additional flexibility based on how you expect to use the equipment.
You can also structure your lease so that equipment does not appear on your balance sheet, which can improve your business’s financial ratios. For tax purposes, true leases can be treated as a business expense, and the entire lease payment can be tax deductible.
And, if you’re thinking about purchasing a lot of equipment at the end of the year, leasing can be an appealing alternative to purchasing because of IRS depreciation deduction rules. When more than 40% of your equipment is purchased during the last quarter of the tax year, a “mid-quarter convention” is applied and you can only deduct 1-1/2 months of depreciation for the equipment bought in the last quarter, even if you’ve been using it for the full three months. However, when you lease the equipment in the last quarter, you can deduct your lease payments as a business expense for the tax year.
Farm Credit Leasing
Unlike other leasing options, Farm Credit Leasing is designed to meet the special needs of agriculture and other businesses serving rural America. From grain storage facilities to vehicles to processing equipment, our leasing experts can help you find exactly what you need.
At Southwest Georgia Farm Credit
Expert advice is just a phone call or email away. Contact your Relationship Manager today, or call 229.246.0384.