From a Tax perspective:

The IRS classifies a lease as either a "True Tax Lease" or "Non tax lease." The IRS seeks to determine whether the risks and benefits of ownership are transferred to the lessee. Here are the guidelines the IRS utilizes in order to classify a lease:

• The leased equipment cannot be "limited use" property
• No right to purchase the property for an amount less than fair market value
• Lessee cannot guarantee payment of any part
• All of the above must apply for the lease to qualify as a true lease

True Tax Lease

The lessor is the owner of the equipment for federal income tax purposes. The lessor receives the right to the tax benefits of ownership, including depreciation and any tax credits. The lessee receives a tax benefit by being allowed to claim the lease payment as an operating expense deduction thus lowering a businesses taxable income. Fair Market Value and 10% purchase option leases qualify as true tax leases.

Non Tax Lease

The IRS treats the lease as if it were a purchase or loan for tax purposes. The lessee receives the same tax benefits as ownership. That means a customer is entitled to claim depreciation and interest expense deductions in lieu of claiming the lease payment as an operating expense deduction. A major benefit of a Non Tax Lease is that it can take advantage of Section 179.

Learn how a Non Tax Lease can help you take advantage of Section 179

Interested in making the right financing decision, contact ST Capital today.

*Please consult your tax advisor regarding any tax or accounting questions