The buy-or-lease question is a common
dilemma, whether you're asking as a homeowner, or for your business. For
perspective, think of the big picture. In either case, you're paying for the
exclusive use of an item over a set period of time. With that as a point of
reference, the difference boils down to two main considerations: cash flow and
exit strategy.
The cash flow associated with buying a
home is straightforward. After making a down payment, you commit to a long-term
obligation. Purchasing a home also offers a tax deduction for interest and real
estate taxes. In contrast, renting may mean a monthly payment lower than what
you'd pay on a mortgage. However, as a renter, you generally won't benefit from
tax breaks.
Business owners receive a tax deduction
whether the final decision is to rent or to buy, but the timing of the
deduction can vary. Lease payments are generally deductible over the life of
the lease. Purchasing offers an immediate tax write-off in the form of
accelerated depreciation or Section 179 expensing. The time value of money can
play a role in your decision, as money you have today can be worth more than
the same amount in the future.
What about exit strategy? When you rent
a home, you know you'll likely have to move at the end of your lease term, and
you won't benefit from any increase in real estate values. Home ownership has
the potential for an increase — or decrease — in the value of your investment.
This is especially true the longer you intend to stay put.
Exit strategy can be less of a decision
factor for your business, especially if your policy is to keep equipment until
it wears out. Do you routinely replace old equipment? A lease might offer an
advantage.
Need help resolving the rent-or-buy
decision? Contact our office for an in-depth analysis.
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