Our FREE IT Depreciation and IT Leasing Worksheet provides general estimates for the depreciation of IT equipment and also two examples concerning the leasing of IT equipment.
It’s Tax Season and if you lease equipment it’s important to understand the value of depreciation for tax implications.
CLR Solutions has gathered depreciation data from the IRS (Section 179) and lease information from the leading IT lease companies. We want to share this important information with you as a service for informational purposes only. Below are brief explanations.
Depreciation Cycle: A depreciation cycle, in the context of IT equipment, is how much less the equipment is worth after it has been purchased. Technology advances rapidly, which influences the value of older equipment and limits its resale value.
Fair Market Value: The value of IT equipment is governed by current market condition. The cost of new technology is a major contributing factor and limits resale of older equipment. In the context of this worksheet, fair market value typically decreases over time.
Capital Lease: This type of equipment leasing plan allows you to buy the equipment at the end of the lease term for a nominal dollar amount, such as $100. This may also be known as Capital Lease with Buy-Out Option.
For companies that intend to keep the equipment at the end of the lease, this is the best option. With this option you are building “equity” in the equipment, which allows you to also sell the equipment at the end of the lease or trade it in for the latest technology.
Operating Lease: An operating lease or Fair Market Value Buy-Out Lease provides you with the option to purchase the equipment at the end of the lease for its then Fair Market Value, continue leasing the equipment based on its Fair Market Value, or return the equipment.
The payment during the term is lower than a capital lease, but the cost at the end of the lease is higher. In most cases, there is a “cap” on the Fair Market Value of 10% of the original cost of the equipment.
Get your FREE IT Depreciation and IT Leasing Worksheet to find out what your current equipment is worth or if you are considering leasing new equipment in 2018, what is the best option for your company.