Written By: Leah Chester-Davis, Judy Wilkerson, Ron Joines
Most people consider their tax returns personal information that they prefer not to share. They consider the information no one else’s business. But when it comes to Judy Wilkerson, loan officer in the Roxboro and Yanceyville offices of Carolina Farm Credit, along with her counterparts across the state, she requests customers’ tax returns for one reason: to help them.
For loan officers, tax returns provide important clues that may help them make recommendations that can help a customer’s bottom line.
“If they want to buy a piece of equipment or some other large purchase, I’ll look at their tax returns. Everybody always wants to save on taxes and not pay Uncle Sam any more than they have to,” Wilkerson explains.
To better advise customers she reviews their tax returns to determine whether they might be good candidates for a lease, which will enable them to write off the lease payment, helping reduce taxes. If it appears a lease would be beneficial, she encourages customers to talk with an accountant who keeps abreast of changing tax laws. Often, a lease may be of more benefit than a loan in reducing taxes, but Wilkerson says it’s important for customers to check that with their accountant.
“With a lot of leases, you can write off 100 percent of the payment. That will help with taxes. But a lease is different from a loan and some people think that if they have a lease for 7 years on a piece of equipment that at the end of 7 years the equipment will be paid off. That’s not true,” says Wilkerson. “Typically, there will be a 15 to 20 percent balance left so you’ve got to decide at that time if you want to renew the lease or pay that amount.”
A factor that needs to be considered is the amount of the lease payment the customer can deduct versus the deductible depreciation amount on a purchase, says Ron Joines, vice president and leasing manager for Carolina Farm Credit. Often, the lease option will be more advantageous financially.
With lease arrangements, insurance is another important element, says Wilkerson. “Any equipment that is leased through us is owned by Farm Credit Leasing and has to be insured. Farm Credit has to be the beneficiary of the insurance policy.”
When it comes to a building that may be under a lease arrangement, property taxes will have to be paid on it, even though it’s a building they don’t own.
As with any financial decision, Wilkerson says that educating yourself on the ins and outs of a certain product or option is important. Your local loan officer can be your first point of contact in learning about options.
“Farming is more expensive now. The profit lines are getting tighter. In some cases, leasing can help you save money and is a better, more affordable way than an outright purchase. We want our customers to know about it,” adds Wilkerson.
Before making any large purchase, whether it’s a vehicle, farm equipment, barn or other farm building, or a solar installation, talk with your loan officer about leasing options available to you.
To learn more about Carolina Farm Credit leasing products, contact your local loan officer or reach Ron Joines directly at 800-521-9952, ext. 2840.
This is the first in a 3-part series, “Leasing Options.” See parts 2 and 3 for information on specific products such as vehicles, farm equipment, barns, and other buildings, and solar installation.