Cash Purchase vs. Bank Loan vs. Lease/Financing
Since there are clear advantages and benefits to cash purchasing, a bank loan and leasing/financing, it is important to investigate all options and the tax implications related to this decision.
When you buy or finance your equipment, you will own outright whatever you purchased. Ownership can have immediate tax advantages for you and your practice. Take a bite out of your taxes with Section 179 Pre-Tax Expensing. If you purchase and install new equipment before January 1, 2014, you may qualify for substantial tax savings allowed by Section 179 of the IRS tax code. Good news! Tax deductions have increased to $500,000 for 2013.
If you choose to lease your equipment, you may be in a better position to step up to the very latest in technological advances as they become available. You will have the use of the equipment that makes your business productive, while preserving your credit lines and working capital.
Over-extending your finances by purchasing costly equipment may deplete your cash. This can leave your practice vulnerable to the whims of the economy. Moreover, this lack of liquidity can also prevent you from taking advantage of timely investment opportunities.
By leasing you can use the equipment you need without reducing your borrowing power and since lease payments are generally regarded as fully deductible expenses, leasing may be a wise choice with solid tax advantages.
Did you know this is the Perfect Year to Invest in a New Edger? The Federal Government is offering a 2013 tax incentive whereby new equipment purchased this year can be expensed immediately at 100%. This allows for the absolute best possible return-on-investment. Always consult with your tax advisor to verify tax incentives. For more information about your financing options and tax incentives, click here.Adobe Reader is needed to view these files. To download, click the icon below.
Note: Information on this page is intended to be used for reference only and does not constitute tax advice. It is based on assumptions that may not apply to your business. The indicated tax treatment applies only to transactions deemed to reflect a purchase of the equipment (i.e.: a conditional sale lease). Consult your tax adviser or accountant to see if you qualify for these deductions and depreciation allowance