Healthcare Practice Strategies - Fall 2013 - Equipment Leasing and Section 179

The good news when it comes to equipment tax deductions extends to leased, as well as purchased, equipment. Your practice can lease equipment and still take full advantage of the Section 179 deduction in 2013.

The advantage of leasing or financing equipment and taking the Section 179 deduction is the fact that you can deduct the full amount of the qualifying purchase in 2013 — without paying the full amount of the purchase this year. Here are two ways it could work:

Option #1: Use a non-tax capital lease.

In a non-tax lease, you are considered to be the owner of the equipment and are, therefore, allowed to reduce your taxable income by the amount of depreciation and interest expense. Utilizing the Section 179 deduction, you can acquire the equipment and then accelerate the depreciation — immediately expensing up to $500,000 this year.

Examples of some common non-tax capital leases include:

•   $1 Buyout Lease – Also referred to as a lease-purchase, this type of lease structure has a fixed monthly payment. The lessee owns the equipment at the end of the lease term for a $1 payment.

•   10 percent PUT Lease – This type of lease structure has a fixed monthly payment with a fixed purchase option. At the end of the lease, you have the option to purchase the equipment at 10 percent of its original cost, renew the lease or return the equipment.

Option #2: Utilize an Equipment Finance Agreement.

An Equipment Finance Agreement (or EFA) is an alternative financing option that is similar to a lease in that you pay for the use of the equipment monthly. Unlike a lease, your practice (not the lender) actually owns the equipment. When you combine a properly structured EFA with a full Section 179 deduction, the amount you deduct will exceed your cash outlay for 2013.

This bottom-line friendly tax strategy might make using Section 179 and/or bonus depreciation with an equipment lease or EFA the most profitable decision you make in 2013. 

To learn more about leasing equipment for your practice, contact our office today. 

Healthcare Practice Strategies - Fall 2013

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