TO LEASE OR BUY?

[Wayne Offiler]

Plan to move up to my new ZTR come Dec. or Jan. I remember from earlier posts that there may be a tax advantage to leasing vs. buying and depreciating over a number of years.
I could take out a home equity loan @ 8.5%, but then (I guess) I could take only the interest on the payments as a business expense.
Any input from those who have faced a similar situation would be greatly appreciated.

[landscaper3]

In response to your question. We lease our mowers (Walker mowers) in fact your lease will enable you to claim 100% Tax refund on all your payments when on a Agriculture leases like the one we have and you were asking about. The mower at lease end will be ours for $100.00 thats all, I belive your lease will be the same also or very simular. As for getting a loan I would stay away from that phase of purchase. You may be lucky to end up claiming up to 25% of loan on tax forms for its not proven what the money went for. We have leased all our Walker mowers and purchased all of them at lease end for $100.00 and been doing that for many years. Also the lease company we have will let us pay November through March and have no payments till April. Other option they would let us do is no payments for 3 months during winter months and make it up at the end. From experience I would never even consider a loan unless it was a business loan and a business loan only. The lease company we have is Telmark and they are very helpful and will stand behind there 100% tax break even if audited.

[bob]

Landscaper3, Do you mean 100% deduction? You said 100% refund. If it was 100% tax refund, that means the mower would virtially be free(except for the $100 buy-out).

[landscaper3]

On our leases on the Walker mowers we deduct 100% of our payments we made on mowers at tax time. The way the Agriculture leases work are say you pay $4000 a year on leases you are entitled by lease contract to deduct all $4000.00 of your payments to your year to date income. The traditional bank loans dont allow this you have to do a depreciation values but on AG leases the federal Government allows 100% deduction on tax returns for your payments.

[landscaper3]

Bob did I clear up the question you asked. Its kinda hard but yet easy to explain and was wondering if I clarified myself better on last post?

[Skookum]

For a small operator, owner, sole proprietor, you can use depreciation line 179 deduction, which is like writing off up to like 10,000 of a capital expense as a straight expense thus not requiring you to depreciate the item or items.

That sounds like a heck of a deal, a buy out of $100. Sounds like a loan that someone just calls a lease. Ag loan, must have been setup to help those poor farmers buy all that expensive equipment. How long will it be before the IRS puts that to a hault? They did it with automobile leasing. They set a maximum price value on the auto. All those friends of mine that had BMW's and Corvettes were scrambling to trade those cars in when they found out that the IRS would not accept a $45,000 auto as a legit business expense and you could only use a percentage of the lease amount based on a 12,000 auto.

This ag lease sounds very interesting! I think I will look into this myself this winter.

Just curious Brian, what kind of payment and time do you have on a mower and how much was the mower?

[MJB]

I've always leased mine. I make payments April thru Oct. no payments during the offseason. Your payments are higher but it's the only way to go. I use Advance Acceptance for the last 9 yrs on 4 different machines.
You can lease for 3 or 4 yrs and get your payments down to about 1 days wages per month, on a Walker, LAZER, OR whatever. Ask your dealers about it. 100% writeoff

[geogunn]

lease...possibly. home equity loan to buy a mower...never!

just my opinion.

I'd take a HE loan only if I were putting the dollars back into the home (sweet home). my situation doesn't fit everyone, I know.

GEO

[HOMER]

I'm leasing with Telmark, never knew I could skip a payment though! I have one with a baloon payment and the other set up on monthly payments. I have a $1.00 buyout at end of lease. It seems to me that it's just a loan that can be written off. Telmark will lease anything you need for your business.

Homer

[Pauls Mowing]

GEO is right-- I'd never take out a HE loan for a business. Too many things can go wrong. I don't mind loaning my company money, but it has to stand by itself.

Paul

[thelawnguy]

Be careful with those $1.00 or 10000 buyout leases; I looked at one for my Exmark did the math and it was the same as if I took out a loan for 31%!

When you buy a machine you either deduct the whole expense under sec 179 rules or depreciate it over time, plus take the interest expense as an expense on sch C, lease it you deduct the payment as an expense it works out the same way.

In an audit the IRS does not classify lawncare as "agriculture" so be forewarned.

Personally I would never use a HE for business purchase. Why risk your home? Let em take the equip if you default somehow.

[landscaper3]

The IRS in fact do quilify some commercial mowers like ours as a agrilculture purchase as stated on our lease forms . As for the buy out of 1.00 or 100.00 dollers they are not as high as you stated or you got scamed on a non AG lease or loan. In fact our intrest rate is closer to 10% and everthing is written off as expenses at years end. So here is the true facts on our leases, "True lease guarantee"
Telmark LLC guarantees that this lease is a "true lease" under federal income tax law. As a "true lease", the lease payments are deductable as business expense.
Telmark will provide assistance to Lessee during any Internal Revenue Service audit to support the "true lease" status of this lease. If there is a Determination that the lease is not a "true lease"(i.e., treated as an operating lease), Telmark will indemnify Lessee agianst the net consequences of any IRS assessment related to this item, including additional income taxes, intrestand penalties. Much more is stated and follows along with IRS references are: Revenue Procedures 75-21, 1975-1 C.B. 715; 75-28, 1975-1, C.B.752; 76-30, 1976-2 C.B. 647 and 79-48, 1979-2 C.B. 529 as amended by Revenue Procedure 81-71, 1981-2 C.B. 731 states that is is a true lease thats 100% tax deductable.

[GroundKprs]

For best tax treatment, always lease trucks, because depreciation recovery on vehicles is too slow. At least you can expense the major part of the vehicle over the first 5 years, then exercise buyout option and depreciate from there.

For other equipment, must balance the amount being purchased the current year with amount of sec. 179 you have already committed for year. If you have no other sec 179 expenses, by all means buy the $8K mower on time and expense all upfront, rather than lease just to expense whole lease cost. Accountant advised me to make maximum use of sec. 179 every year. For larger companies, which exceed sec. 179 limits repeatedly, lease may be a better option. If not sure about your situation, it's time to get a good accountant.

[Ocutter]

Whats the address of Telmark or phone #. Are they in N.J.

[landscaper3]

Telmark is in New York there phone number is 1-800-451-3322 they are in Syracuse NY. They are the way to go when purchasing new mowers but they also do leases on used Walker mowers do to they retain 80% plus of there retail value which is nice, that way you can lease a used one also and save money and they might do other models also on used mowers.

[gene gls]

Telmark: http://www.telmark.com