A company is able to take the qualifying Section 179 deduction with a properly structured finance or lease agreement. In fact, it is the preferred method for most companies who are looking to take advantage of the tax deduction and the company's cash flow.
Non-Tax Capital Lease or Equipment Finance Agreement (EFA)
The main benefit of a non-tax capital lease or equipment finance agreement is that a company can still take full advantage of the Section 179 deduction, yet make smaller payments. So, a company can acquire and write off up to $500,000 worth of equipment during the current year, without actually spending $500,000 this year! A business that is managing cash flow can leverage a non-tax capital lease or EFA and still take the Section 179 deduction.
Examples of a qualifying structure are the traditional $1.00 buyout, 10% PUT (Payment Upon Termination) or an Equipment Finance Agreement (EFA). In many cases, the amount of the company's tax savings will exceed the amount of payments made for the equipment during the current year.
A company can actually profit in year one from Section 179 by financing!
