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TAX ADVANTAGES OF EQUIPMENT FINANCING

Keep more of what your equipment earns

Recent federal tax law makes it possible to write off the full cost of revenue-producing equipment in year one — even on financed purchases. Here’s what that means for your business.

Why it matters

Financing doesn't reduce your deduction. It amplifies it.

Many business owners assume tax deductions only apply to equipment they've paid for outright. The opposite is true. When you finance equipment, you can still deduct the full purchase price in year one — while only paying a fraction of that cost up front. Your cash stays in the business. Your tax bill shrinks.

  • Full deduction, partial payment

    Write off the entire equipment cost in year one while making manageable monthly payments — your taxable income drops without draining cash reserves.

  • New and used equipment both qualify

    Both new and used tangible business property placed in service on or after January 20, 2025 are eligible — upgrading your existing fleet counts too.

  • Interest costs are deductible too

    Under restored EBITDA-based rules, your financing interest is more likely to be fully deductible — compounding the benefit of equipment financing.

Current tax law

What the One Big Beautiful Bill Act means for equipment buyers

Signed into law on July 4, 2025, the OBBBA made several equipment-related tax provisions permanent. Here's what your tax advisor will want to know — and what you should ask them about.

  • Section 179

    Expanded first-year expensing — up to $2.5 million

    Section 179 lets businesses deduct the full cost of qualifying equipment in the year it's purchased, rather than depreciating it over several years. The OBBBA increased both the maximum deduction and the spending cap, giving more businesses access to the full benefit.

    $2.5MMaximum deduction
    $4MSpending cap before phase-out
    New & usedEquipment eligibility

    Once total equipment purchases exceed $4M in a tax year, the Section 179 deduction phases out dollar-for-dollar. Bonus depreciation can cover the remainder — ask your tax advisor how to structure purchases across both provisions.

  • Bonus Depreciation

    100% bonus depreciation — now permanent

    Bonus depreciation previously had a phase-out schedule winding down to zero. The OBBBA made 100% bonus depreciation permanent. You can now expense the entire cost of qualifying equipment in year one with no dollar cap — making it especially valuable for larger purchases that exceed Section 179 limits.

    100%First-year deduction rate
    No capOn qualifying equipment cost
    PermanentNo phase-out scheduled

    For purchases between $2.5M and $4M, 179 and bonus depreciation can be combined. Above $4M, bonus depreciation picks up where 179 phases out, so the full amount remains deductible in year one.

  • Interest Deductions

    Financing costs are more deductible under restored EBITDA rules

    The OBBBA restored the 30% business interest deduction cap using EBITDA (earnings before interest, taxes, depreciation, and amortization) rather than EBIT. Because EBITDA includes depreciation and amortization, the base used to calculate your allowable interest deduction is larger — which matters for equipment-heavy operations.

    This provision is especially impactful for transportation, construction, manufacturing, and equipment rental businesses with significant depreciation expenses. Your tax advisor can calculate exactly how much of your financing interest becomes deductible under the restored rules.

Tax savings estimator

See what your deduction could look like

Enter your equipment cost and tax rate. The calculator automatically determines the right deduction strategy based on your purchase amount.

Est. first-year deduction
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Est. tax savings
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How it breaks down
Illustrative purposes only. This tool provides estimates based on the inputs you provide and does not constitute tax, legal, or accounting advice. Actual deduction eligibility depends on your specific tax situation, equipment type, business use percentage, taxable income level, and filing status. Every business is different. Please consult your accountant or tax advisor before making any financial or tax decisions.
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Planning ahead

Three things to get right before year-end

These aren't tax strategies — they're operational realities. Getting these right ensures you don't accidentally miss the deduction you've already qualified for.

  • 01

    Meet the in-service deadline

    Equipment must be purchased and placed in service — meaning ready and available for business use — by December 31 to count in that tax year. Purchased but sitting in a warehouse doesn't qualify.

  • 02

    Plan deliveries early

    Year-end shipping timelines get compressed fast. If you're targeting a Q4 purchase for current-year tax treatment, build delivery lead time into your plan now — not in November.

  • 03

    Structure your financing agreement correctly

    Not all financing structures are treated the same way for tax purposes. An Equipment Finance Agreement (EFA) is generally treated as a purchase, preserving depreciation eligibility. Your advisor and your financing partner should be aligned before you sign.

Ready to put your equipment to work?

United Leasing & Finance can structure your financing agreement to align with your tax planning timeline. Bring your advisor's guidance — we'll handle the financing.

Apply now

Common questions

Questions to bring to your tax advisor

We've answered these at a general level — your specific answers will depend on your tax situation, which is why your accountant is the right person to finalize anything here.

Yes. The deduction is tied to ownership and placed-in-service status, not to whether you paid in full. Qualifying tangible property that is financed and placed in service on or after January 20, 2025 is eligible for 100% bonus depreciation — as long as the financing structure is treated as a purchase (e.g., an EFA rather than an operating lease).
Above the $4M spending cap, the Section 179 deduction phases out dollar-for-dollar. However, 100% bonus depreciation has no dollar cap — so any equipment costs that exceed Section 179 limits can still be fully deducted in year one via bonus depreciation. The estimator above accounts for this automatically.
The restored EBITDA-based cap applies broadly, but the actual benefit depends on how much interest your business carries and your total income picture. It tends to be most impactful for asset-heavy businesses in transportation, construction, manufacturing, and equipment rental — where depreciation and amortization expenses are significant. Your tax advisor can run the specific numbers.
Equipment is considered "placed in service" when it's ready and available for its intended business use — not just when it's purchased or delivered. If a truck arrives December 30 but isn't ready to operate until January, it likely doesn't qualify for the current tax year. Coordinate with your vendor and financing partner to confirm readiness before the calendar flips.
Most tangible business property qualifies — including machinery, vehicles, trailers, and off-the-shelf software — as long as the equipment is used at least 50% for business purposes. Certain property types (like real estate improvements) have different rules. Your tax advisor can confirm eligibility for your specific equipment category.
Yes, and for many mid-to-large purchases it makes sense to use both. Section 179 is applied first, up to the $2.5M limit (with phase-out above $4M in total spending). Bonus depreciation then applies to any remaining eligible costs. For most equipment purchases under $2.5M, either provision alone gets you to a full first-year deduction. The calculator above handles this automatically.