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Quiz
1. How
much money do I need to start when obtaining
office equipment? If
you are cash poor when beginning your
business, then a lease may be the best
option, as most equipment leasing companies
do not require a down payment. Also, many
leases have maintenance agreements in their
contract to deal with repairs,
| "Success produces
success, just as money produces
money." - Diane Ackerman |
which can save money, especially if you
are leasing used equipment. If you are
planning to buy your equipment, a down
payment of 10% is usually needed. In
the long run, you will pay more with a lease
than with a purchase, and you will have no
ownership of the equipment. Since the lessor
still technically owns the equipment, prices
per month are usually higher to offset the
risk of the lessor allowing you to use their
equipment.
__ I
have no money to obtain office equipment (0
points)
__ I have
some money, but not a lot (3 points)
__ I am financially secure enough to
afford office equipment (5 points)
2. Do
I need to upgrade my office equipment
constantly? There
are lease agreements where you can ask to
have it include upgrades, where an obsolete
machine can be replaced through the life of
the lease. With a purchase, if the equipment
becomes obsolete, it's your problem, not the
vendor's. Overall, leasing usually will have
better maintenance agreements. It's this
simple: when the equipment is still owned by
the vendor or lessor, they have more of an
interest that the equipment is working
correctly, because
| "Life is a
continual upgrade." - J. Mark Wallace |
they may have to resell it in the future.
However, if a lease does not have an upgrade
agreement, it forces you to keep the
equipment during the entirety of the lease,
and if you no longer use the equipment, you
may still be paying for it.
__ I
will constantly be upgrading my equipment (0
points)
__ I only have to upgrade my equipment every
couple of years (2 points)
__ The equipment I buy now will be the
equipment I keep (6 points)
3. Will I be writing off this equipment? The
leasing of office equipment can be fully tax
deductible if you use the leased asset in
your business, as long as the IRS does not
recharacterize your lease as a purchase for
tax purposes, meaning that if the IRS thinks
that your lease is actually a conditional
sale or an installment toward that
conditional sale (like a lease-to-buy
agreement), they will not accept it. However,
with a lease, you risk losing tax benefits
for accelerated depreciation.
| "When you are
feeling depreciated, angry and
drained, it is a sign that other
people are not open to your energy."
- Sanaya Roman |
Another tax factor from leasing is that
you risk losing benefits for accelerated
depreciation. The purchase of equipment
allows you claim a greater percentage of the
item's cost on your taxes over each year of
the object's useful life. For example, if you
bought a fax machine, and it is believed to
have a four-year life span for usefulness,
the first year you may be able to deduct 25%
of the machine, and then the second year 30%
can be deducted. This was put in the tax code
as an incentive for companies to purchase new
office equipment every few years. Overall,
purchasing equipment is better as a tax
write-off, but both leasing and buying can be
used on your taxes.
__ Tax write-off? What's that? (0 points)
__ My accountant will write my equipment off,
if I remember (1 point)
__ I want every penny back from Uncle Sam (3
points) |
