A true tax lease must meet all of the following criteria:

At the start of the lease, the fair market value of the leased property projected for the end of the lease term equals or exceeds 20% of the original cost of the leased property (excluding front-end fee, inflation and any cost to the lessor for [...]

IRS Classification
It is important to understand the different types of leases before you try to understand the tax advantages of leasing. For IRS purposes, equipment leases generally fall into two categories, each with a different type of purchase option:

Interest rate will fluctuate from lease to lease depending upon a number of factors including: personal credit of borrower, dollar amount of equipment, type of equipment, the type of business applying for the lease and the time that the borrower (company) has been in business.

To illustrate the tax benefits of leasing, we will explain the different taxable situations you will be involved in depending upon whether you choose to pay cash, utilize a bank loan or lease your equipment.

There are many different types of programs offered by equipment leasing companies. This variety of programs is great for businesses that might require a flexible payment plan. Common flexible payment plans include: 90 days deferred, 7 x $100.00, 6 x $99.00, Annual Payments, Step Payments, etc.

When considering the different financing options for acquiring equipment, a common question many businesses have is whether they should opt for leasing or bank borrowing.

The “end of lease” option determines how the lease terminates, and how the lessee becomes the owner of the leased equipment at the end of the lease. There are essentially 3 common “end of lease” options to choose from: