Is leasing equipment a good option for you?

Tax advantages, business benefits are key reasons to consider leasing

by Southwest Georgia Farm Credit | Oct 20, 2017

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.

Financial advantages

Leasing is a flexible way to help you control cash flow. Typically, you can adjust the length of term, frequency of ayments, 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 lternative 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.

Expert advice is just a phone call or email away.

Contact your Farm Credit Relationship Manager today, or call 229.246.0384.