Understanding Section 179 and Equipment Leasing
Section 179 of the IRS tax code is designed to encourage businesses to invest in equipment by allowing them to deduct the full purchase price of qualifying assets in the year they are placed into service.
While many people associate Section 179 with equipment purchases, it can also apply to certain types of equipment leases, depending on how the lease is structured.
How Section 179 Applies to Equipment Leasing
Capital (Finance) Leases
Certain lease structures—such as $1 buyout leases or fixed purchase option leases—may be treated similarly to a purchase. In these cases, the equipment is typically considered owned by the business for tax purposes.
This may allow the business to:
- Deduct the full cost of the equipment under Section 179
- Take advantage of bonus depreciation (if applicable)
- Spread payments over time while accelerating tax benefits
Operating Leases (FMV Leases)
With fair market value (FMV) leases, the equipment is generally not treated as owned during the lease term.
In these cases, businesses may:
- Deduct lease payments as an operating expense
- Preserve capital with lower monthly payments
- Maintain flexibility at the end of the lease
Why This Matters for Your Business
Understanding how your lease is structured can have a meaningful impact on:
- Cash flow
- Tax treatment
- Balance sheet positioning
- Long-term equipment strategy
For many businesses, the ability to combine financing flexibility with potential tax advantages makes equipment leasing an attractive option.
Structuring the Right Solution
At National Equipment Finance, we work with clients to structure equipment financing solutions that align with their operational needs and financial goals.
This includes helping you evaluate whether a lease or loan structure may be the best fit based on:
- Equipment type
- Intended use
- Cash flow considerations
- Long-term ownership goals
Important Disclaimer
National Equipment Finance does not provide tax, legal, or accounting advice. The information above is for general informational purposes only.
Businesses should consult with their CPA or qualified tax advisor to determine how Section 179 and other tax regulations apply to their specific situation.