Below is information that Business need to know about capital leases and how it affects their accounting. If you are getting new equipment changes may occur in the deductions. It looks as if the deductions are going to drop back to 25,000 in 2011.
If equipment can be purchased in 2010 it is highly recommend so tax codes changes will not effect your business.
Equipment can be a great way to get the benefits of a refund and using the increased revenue from the equipment to pay for the lease payment.
Medical equipment sales for units that provide ROI are going to be very strong towards the end of the year. Please plan accordingly and try to make purchase early to take advantage of low prices and not get stuck in a buyer frenzy.
For financial statement and tax purposes, a lessee should capitalize a lease if it meets at least one of the following criteria:
a. Ownership transfer test. The lease passes title to the lessee by the end of the lease term.
b. Bargain purchase option test. The lease contains a bargain purchase option.
c. 75% test. The lease term is at least 75% of the property's estimated economic life.
d. 90% test. The present value of the minimum lease payments is at least 90% of the property's fair value.
If the lease meets any one of these criteria, the leased asset should be recorded on the Company's financial statements along with the corresponding lease liability net of deferred interest. For tax purposes, the leased asset may be depreciated by the lessee and qualify for the Section 179 expense election. The maximum Section 179 dollar limitation is $134,000 for tax years beginning in 2010.
Clearwater CPA Accountant - Call Today To Schedule a Free Consultation.
Judy Driscoll CPA (Certified Public Accountant) Located at:
250 N. Belcher Road, Suite 100, Clearwater, FL 33765
Office 727-441-6829
Specializes in Business Accounting for: Audits, 401k Audits, and Financial Statement Reviews.
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