Buy

Lease

Price                                  

$20,000.00

Price

$20,000.00

Interest rate

8.00%

Down Payment

$1000

Other fees lease

$100.00

Residual percent

60%

Security deposit

$500.00

Lease payment

$424.35

Cost of buying issues

Cost of leasing

Annual lease expense

$5,092

Selecting A Depreciation Method – It depends on your personal tax situation. See your Advisor.

These scenarios assume the business entity takes the expense and (on the K-1) passes it through to the owner, who is in the 40% tax bracket

Scenario 1

(using Straight Line Depreciation expense)

$4,000

Annual tax savings

(Ann. Depreciation Expense X 40% tax bracket)

$1,600

Annual tax savings

(Annual Lease Expense X 40% tax bracket)

$2,037

Scenario 2

Depreciation expensed all in the first year  (IRS Sec. 179)

$20,000

Scenario 1

Useful Life tax savings (over 5 years)

$8,000

Total tax savings (throughout 5 year lease term) Expensing the annual lease expense for 5 yrs. (Annual Tax Savings X 40% tax bracket)

$10,185

Scenario 2

One time tax savings taken all in the first year

$8,000

Opportunity Cost Given Up (investing the $20,000) *

$4,028

Annuity cost (what $424 invested monthly* would yield  over five years)

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