Equipment leases that include a $1.00 purchase option qualify for the federal section 179 deduction and regular depreciation. Companies may also be eligible for additional state and local tax deductions plus interest deductions. Companies purchasing equipment now could see their tax savings cover the first year's payments!

This deduction allows a company to deduct the first $128,000 of equipment (Section 179 Property) purchased in 2008 for their taxable income. For companies purchasing (or leasing - with a $1.00 buy-out lease) up to $510,000 of equipment in 2008, this deduction is available in full. It then phases out on a dollar-for-dollar basis between $510,000 and $638,000 and it is not available for companies purchasing over $638,000 of equipment in 2008. However, companies can finance purchases over $510,000 with an operating lease and may still be able to claim this deduction.

Additionally, companies can take their standard depreciation deductions on the adjusted basis of qualified equipment. Machine tools and fabricating equipment are typically depreciated over 7 years.