Posted by Nikki Wardle on Nov 1, 2016 9:09:00 AM
When you look at a semi truck, what do you see? Do you see possibilities for your business? Do you see a financial hurdle that may be challenging to cross at first, but is well worth the work in the end? Do you see a big decision to be made? Well, one thing that too many small business owners overlook is the tax benefits of leasing a semi truck. The truth is that this choice may be healthy for your company in more than one way!
A Quick Overview
Everyone who's ever filed taxes can attest that calculating exact tax benefits is no simple matter, but with equipment financing experts at your back, it's nothing to worry about. The first thing you need to know is that, when it comes to semi truck leasing, there are two main types of leases. The differences are important, both for your taxes and for your business itself, so make sure you know what you're getting into.
The first type of lease is called an operating lease. These agreements are fairly standard at first glance: they allow you to use a semi truck for an agreed-upon term. However, the most important detail is that you can't be held responsible for any aspects of ownership except those involved in use of the truck. This is the biggest factor in determining how an operating lease affects your taxes. It's the operating lease payments that you'll end up deducting, which means that, while the lease itself is beneficial, it's not the most efficient in terms of taxes.
The second type of lease is a capital lease. Again, the basics are standard; like an operating lease, capital leases provide you the rights to use a semi truck for an agreed term. The difference is that you also shoulder a portion of the risks and benefits associated with long-term ownership. This makes the truck itself an asset and the lease a liability. When it comes time to file taxes, you deduct the interest payed on the lease and depreciate the value of the truck from the beginning of the lease to the end.
Now that you have a better idea of your options, how do you make the right choice? That's the next step.
What to Consider
Before deciding which type of lease is best for your company, it's important to take a step back and reflect on the benefits and possible risks of each choice. Our financial experts have compiled a short list of things to consider before making the final call.
- Leasing. The first thing to remember is that leasing has a lot more benefits than just tax deductions. Leasing a semi truck allows you to retain the nimbleness and flexibility that can keep your company strong in an uncertain economy; being tied down to one piece of equipment can be costly, inefficient, and frustrating. Don't anchor your company--go for the lease.
- Personalization. The truth about financial decisions is that sound choices rely entirely on your unique position. Different companies benefit from different options. For example, small businesses often choose to lease semi trucks because the tax benefits are high and the ownership risks are low (or even nonexistent). Be sure to consider your company itself, your profitability, and your financial goals before making any decisions.
- Cash. Cash is probably the single biggest consideration when it comes to choosing a semi truck lease. The truth is that, when you spend money to achieve a tax deduction, you're reducing your taxable income rather than directly impacting your tax itself. The specifics are subject to change and can get a little complicated, so it's always best to contact an equipment financing expert for clarification and a bit of well-placed advice.
Interested in more information on leasing and financing? Looking for financial advice? Contact us today!