For anyone who’s self-employed, tax time is not exactly fun. It’s confusing and often small enterprises, despite being simple, cost a lot to have returns prepared. TurboTax makes a business product that’s pretty good for simple ventures. Obviously, if you have a business producing income or has a higher degree of complexity, please hire a professional.
Here’s a link to Intuit’s website where they’re offering a FREE copy of TurboTax Business 2009.
This is not a gimmick. Enjoy!
Like me, you may hear a lot of business owners talking about utilizing a “sale leaseback” to help reduce their taxes. More than likely, they don’t know how it works any better than you do, so let’s explore the basics.
Capital vs. Operating Leases
The accounting treatment of capital leases are different from operating leases, so it’s important to differentiate the two. A lease is defined as:
“…an agreement conveying the right to use property, plant or equipment (land and/or depreciable assets), usually for a stated period.”
A capital lease is defined by meeting any one of the following four criteria:
- Ownership is transferred at the end of the lease
- There is a bargain purchase option (an inducement to buy the asset at the end of the lease at a much lower price than its expected market value).
- The length of the lease is equal to or greater than 75% of the useful life of the asset
- The present value of future payments (the total the buyer would pay today in cash if the asset were bought outright) is equal to at least 90% of the leased asset’s market value
If the lease does not meet any of the four criteria above, then it is an operating lease (rental).
The Benefits of a Sale-Leaseback
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