Tax Guru-Ker$tetter Letter

Friday, October 07, 2005

No Double-Deducting Lease Payments

Subject: lease
On your site under the Section 179 & Leases, you mention that capital leases are "disguised purchases" and using a $1 buy-out that section 179 would be allowed to be taken in the first year. Are you also saying that in addition to taking the 179 deduction/savings you can take advantage of the leasing tax advantages as well, even though it is not truly a lease (FMV etc).? Thanks

If by the "leasing tax advantage" you mean deducting the monthly lease payments, that is not possible if you have chosen to treat the acquisition as a purchase. Under that scenario, you would set the asset up on your books at its purchase price, along with a liability for the principal portion of the future lease payments. Each month, you can deduct the interest portion of the payments to the leasing company; but not the principal portion. That is already being deducted via depreciation and Section 179. You can't double-deduct the same expenditures.

This isn't a complicated issue. You should be working with a competent tax pro who can better advise on how this fits your particular situation.

Good luck.

Kerry Kerstetter

Follow-Up:

Thank you very much!!

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 10/07/2005 10:55:00 AM Send this post: