Capital Leases

From a financial reporting perspective, a capital lease has all the characteristics of a purchase agreement and also meets criteria established by the Financial Accounting Standards Board (FSAB). These leases can be up to five (5) years and have a purchase option ($1.00) with ownership transferring to the lessee at maturity. Such a lease must be shown as an asset and related liability on the lessee’s balance sheet. An important benefit is that it can qualify the lessee’s capital purchase for Section 179 tax deduction of up to $250,000.00 in the tax year.