Thursday, February 23, 2012

IT'S TAX TIME AGAIN

ARE YOU LOOKING FOR WAYS TO REDUCE THE TAX BITE?
LEASING MAY BE PART OF THE ANSWER.

Most business owners are looking for ways to reduce taxes and leasing may help.  Why not pay for your equipment and vehicles in a way that could reduce taxes!  The example below is intended to show the potential of how leasing can be advantageous.  It is not intended as tax advice.  We suggest that you discuss this illustration with your tax advisor to determine how it will affect your situation.

When a lease is structured correctly, it can provide a potential tax benefit.  That's because the lease payment is a fixed expense and it is paid out of gross profit (Pre-Tax Dollars).  The payments reduce the taxable gross profit; therefore the tax bite is reduced. 

If a business entitiy is in the 34% tax bracket (Maximum Corporate Tax Rate), it will save 34 cents in taxes on every dollar it pays in the lease payment (Sales Tax included).

Here's the example:

CLICK ON THE EXAMPLE TO ENLARGE

In effect, Uncle Sam is picking up 1/3 of the total cost.  In addition to the potential tax benefit, a lease requires no down payment or large cash outlay.  Lease financing is 100% financing which means the business entity will preserve its cash and its lines of credit for its working capital needs.