What is the difference between buying and leasing with equipment?
I am buying a dump truck and the finance company wants to lease it to me with a $1 buyout at the end. Why is it a lease instead of a purchase? How will it affect my taxes for my business at the end of the year?
with leasing, you can expense the entire monthly payment. If you buy it, you have to capitalize it and depreciate it – the monthly depreciation may be less than the monthly expense deduction – but you may be able to take sec 179 depreciation on it which means you could deduct the entire purchase in the year of purchase, BUT only to the amount of profit. say your business made $15000 profit after all expenses except the truck. Truck costs 20000. You could take section 179 deprec for $15,00 and depreciate the 5000 balance over the remaining life (3-5 yrs) – talk to a CPA to get exact details
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with leasing, you can expense the entire monthly payment. If you buy it, you have to capitalize it and depreciate it – the monthly depreciation may be less than the monthly expense deduction – but you may be able to take sec 179 depreciation on it which means you could deduct the entire purchase in the year of purchase, BUT only to the amount of profit. say your business made $15000 profit after all expenses except the truck. Truck costs 20000. You could take section 179 deprec for $15,00 and depreciate the 5000 balance over the remaining life (3-5 yrs) – talk to a CPA to get exact details
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