Equipment Leasing: Tax Deduction Game or Strategic Capital Play?
Short answer: No — equipment leasing is not primarily a “tax deduction game.”
Tax benefits are real, but they only account for 15–25% of the total value. The real game is capital efficiency, cash-flow preservation, and risk transfer. Taxes are just the cherry on top.
The Tax Myth vs. Reality (2025 Rules)
| Myth | Reality |
|---|---|
| “Leasing = tax loophole” | Tax benefit = only 15–25% of total savings |
| “Always cheaper than buying” | Depends on asset life, rates & residual |
| “Off-balance sheet = free money” | ASC 842 ended this in 2022 |
True Value Breakdown — $100K Equipment Example (48 months)
| Factor | Lease | Purchase | Lease Advantage |
|---|---|---|---|
| Upfront Cash | $2,500 | $100,000 | $97,500 |
| Monthly Cash Flow | $2,500 | $2,100* | $400/mo better |
| Tax Deduction | $120,000 | $120,000 | $0 difference |
| Residual Risk | $0 | $25,000 | $25,000 |
| Obsolescence Risk | $0 | $30,000 | $30,000 |
| Total 4-Year Value | $152,500 | $175,000 | $77,500 win for lease |
*Purchase assumes 6% loan
When Leasing Actually Wins (The Real Math)
Lease if:
- Asset life < 5 years (tech, vehicles)
- High obsolescence risk (IT, medical)
- Cash preservation is critical (growing SMBs)
- Usage is variable (construction, seasonal)
The Real Tax Edges in 2025
| Benefit | Lease | Purchase | Winner |
|---|---|---|---|
| Sales tax (42 states) | Exempt | 6–10% upfront | Lease |
| Maintenance deductibility | 100% expensed | Capitalized | Lease |
| IRA clean energy credits | Same | Same | Tie |
| End-of-term flexibility | Return / Renew / Buy | Stuck | Lease |
Bottom Line — It’s a Capital Game, Not a Tax Game
Tax savings: 15–25%
Capital efficiency: 40–50%
Risk transfer: 25–35%
Flexibility: 10–20%
ELFA 2025 data: 82% of lessees renew or refinance — not for tax reasons, but because the economics simply work better.
Vinay Bhatia
Founder & CEO, Fortune LLC (est. 2019)
vinay.bhatia@fortunellc.us
globallending.fortunellc.us
No comments:
Post a Comment