Short & long-term rental SOLUTIONs
Specific Tax Considerations
Deduction of Rental Expenses
Rental expenses are considered operating expenses and can be deducted from taxable income in the year they are incurred. This immediate deduction reduces the taxable income for
the business, resulting in lower tax liability. This contrasts with cash purchases, where the cost is typically
capitalized and depreciated over time, resulting in tax deductions spread out over several years.
Preservation of Capital Allowances
When renting equipment, businesses do not incur capital expenditure, which means they do not deplete their capital allowances. Capital allowances are tax deductions allowed for
the wear and tear or depreciation of capital assets over time. By renting instead of purchasing outright,
businesses can preserve their capital allowances for other capital investments.
Flexibility in Financing
Renting equipment provides businesses with flexibility in financing, as they can spread the cost of equipment over time rather than making a large upfront payment. This can be advantageous for businesses with limited cash flow or those looking to allocate capital to other investments. Additionally, rental payments are often structured as operating expenses, which may be easier to budget for than a significant
capital expenditure.
No Depreciation or Maintenance Costs
Rental agreements typically relieve businesses of the responsibility for depreciation expenses and the costs associated with maintenance and repairs. These expenses are usually borne by the rental company, providing additional cost savings and simplifying accounting for the renter.
