What is the difference in tax benefits in a Capital versus Operating lease?
The Lessee is considered the owner of the equipment for tax purposes in a Capital Lease. The lessee can claim depreciation on the equipment on its tax returns. For an Operating lease, the lessee is not considered the owner of the equipment for tax purposes. Therefore, it cannot claim depreciation on its tax returns. Although the lessor is the owner of the equipment in an operating lease and, therefore, receives the tax benefits, the Lessee does receive lower rental payments. The Lessee will receive deductions on the total amount of rental payments on its tax statements.
