$1 Buyout Lease Information

[Urban Banners]

Doing my business taxes has gone well, until I added a new piece of equipment.

My company did a capital lease for a printer with a $1 buyout at the end of a 5 year term. From what I've read, we basically own it & can deduct the entire cost for the 2020 tax year.

The ticket price on the printer was $8,500. Our final fixed cost has us at $10,500 for a $8,500 piece of equipment.

Since we're in a contract to pay off the printer, I'd like to deduct the entire cost for the 2020 tax year.

I need to know how to handle the payments each on the LLCs taxes & balance that against the one-time deduction.

[ToddL99]

This appears to be a capital lease and qualifies for Sec 179 deduction.

Enter the printer in the Business assets interview of TurboTax using the ticket price of $8500 as the purchase price, and making the appropriate Sec 179 or special depreciation allowance election (see sample screen shot, below).

Record the liability (Equipment Loan) on your LLC books with a principal balance of $8500. 

With a 5-year amortization (60 payments of $175) at 8.65%, your total cost will be $10,500 (sample amortization schedule attached). You can make manual entries each month to record the interest expense, or a year-end adjusting entry.

See Tax Benefit of Operating Leases vs Capital Leases