100% Equipment Finance Solutions
Equipment leasing may allow your business to improve your tax position and stay current with the latest innovations without becoming burdened with aging, obsolete equipment and technology.
- Finance 100% of equipment cost and use cash for working capital and business growth, not equipment purchases.
- Freight, taxes, fees, rigging and set-up charges may be included in the equipment cost and amortized over the least term.
- Lower payments through exchanging tax benefits. When Huntington owns the asset, it retains certain tax benefits (i.e., depreciation) and passes those benefits to its clients through lower lease payments.
- Generate cash through sale/leaseback.
- Match payments to cash cycle.
Minimize and Leverage Tax Positions
- Avoid the negative impact of asset purchases
Minimize Alternative Minimum Tax (AMT) impact. Lease payments/rentals are not treated as a tax preference item. Company-owned equipment is depreciated via MACRS faster for tax purposes than for book purposes. A company’s book income is typically greater than its tax income. Generally 50% of the excess book income over tax income is treated as a tax preference item used to calculate AMT. So lease it – no depreciation, no preference item, no AMT problem!
Leverage the 40% rule/Mid-Quarter Depreciation Convention. If more than 40% of a company’s annual equipment acquisitions (via cash purchase or loan financing) occur during its fourth fiscal tax quarter, the company must use the Mid-Quarter Depreciation Convention instead of the preferred Mid-Year Convention. Therefore, companies incurring significant CAPEX in the fourth quarter may find it more prudent and economically beneficial to lease versus own/depreciate.
- Utilize net operating loss carry-forwards.
- Exchange tax benefits for lower cost of money.
- Reduce property taxes by reducing the “basis” in the equipment at the end of the lease term.
- Write off equipment purchases in the form of rental payments and reduce taxable income faster than allowable accelerated depreciation methods.
Optimize Financial Reporting
- Improve earnings in the near term. Lease payments are usually less than depreciation and interest expense during the first three years.
- Comply with primary bank ratios and revenue bond covenants.
- Improve Return on Assets.
- Minimize financial restrictions.
- Properly match use to ownership risks.
- Reduce cash requirements during the useful life of the equipment.
- Avoid stranded assets.
- Trade up to avoid obsolescence.
For More Information, Contact
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