Tax Benefits Of Equipment Leasing
There are many practical benefits to using equipment leasing as a way to get the items your business needs to succeed. Some of them are related to taxes. Since being proactive about your accounting practices could cause you to have more time to devote towards other things, it’s important to stay informed about tax benefits so you can take full advantage of them.
The Basics of Section 179
In straightforward language, Section 179 is an incentive put forth by the United States government to encourage businesses to make investments towards their company goals through purchases or equipment leasing. It allows you to deduct the full price of the purchase or lease from your gross income.
Often, items used for a business can be written off, but the process must occur across several years through depreciation. In contrast, Section 179 allows a businessperson to lease equipment and write off the entire cost as a valid expense within the same tax year.
What You Need to Know About the Section 179 Deduction Limit
Section 179 spells out the tax specifics that you need to be aware of if you plan to lease equipment and get a deduction on it. However, keep in mind that there are changes to the details each year. It’s not enough to educate yourself on what you need to know for a single year and expect that the rules will be consistent for subsequent years.
Currently, Section 179 has a deduction limit of $25,000. It applies to both used and new pieces of equipment, plus software titles that are bought off the shelf. In order to qualify for the Section 179 deduction, your equipment leasing items must be acquired and put into service by the end of the last day of 2015.
There’s a Spending Cap
Equipment leasing is a particularly attractive alternative for small businesses, because it allows entrepreneurs to pay for the use of items in small increments without having to shoulder the risks associated with ownership. There’s also a part of the tax law that suggests the Section 179 benefits are catered towards small businesses.
A maximum of $200,000 can be spent towards equipment by a business until a spending cap comes into effect. After that point, the maximum deduction available to your company gets decreased dollar for dollar.
Hopefully you now have a grasp on why equipment leasing is so advantageous, especially in terms of tax filings. Beyond that, many business owners love to be able to make monthly payments for their leased items, thereby freeing up more cash to spend on other things.