This guest blog was contributed by Joe Terfler.
In the imaging equipment space, the majority of equipment is financed under rental/cost-per-image agreements. These agreements allow the equipment vendor to better manage long-term customer relationships, as the agreements typically allow for the return of the equipment at the end of the term. While the imaging equipment market favors these agreements, another approach that takes advantage of accelerated depreciation can benefit certain customers and possibly drive sales that might otherwise not happen. This is particularly true at year’s end.
Under rental agreements, the customer’s income tax deduction for the year will most often be limited to the total payments made under the agreement during the tax year. This is so because the rental agreement is typically deemed a true lease for tax purposes, with each lease payment being considered a deductible operating expense when paid (or, in some instances, when due). If the transaction can be structured so that the customer owns the equipment at the end of term (e.g., through a $1 buyout lease), then the initial tax deduction for the customer can be dramatically increased. go here for more