floyd
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Continuing the thread from http://www.directadmin.com/forum/showthread.php?t=30096
Which is exactly what I am saying.
For arguments sake let's say your tax bracket is 30%. That means after all your deductions you have to pay 30% of you taxable income to the government.
Say you pay $300 in a year for a software lease. You can deduct that $300 from your taxable income. So by deducting that $300 from your taxable income you don't pay the government $90 that you would normally have to pay. Your net expense for the software for the year is $210. Assuming everything stays the same it will cost you $210 every year. If you lease the software for 5 years that means that license will have cost you $1050 in 5 years.
Say you pay $300 for a lifetime license. You can deduct $150 from your taxable income. So by deducting $150 from your taxable income you don't pay the government $45 that you would normally have to pay. Your net expense for the software is $255. After 5 years the license will have cost you $255.
So in the above example if you only plan on using a piece of software that cost $300 for one year then yes leasing is the way to go since $210 is less that $255. If you plan on using it for more than one year buying a lifetime license is the way to go.
For some reason tax deductions are confusing to people. Many believe that a $300 tax deduction means that is $300 less that they have to pay the government. Not true. It means you don't have to pay taxes on the $300 which generally be anywhere from 25% - 50% or even more. So the amount you don't have to pay the government is some percentage of the deduction. A tax deduction means you can subtract it from your taxable income. It does not mean you can subtract it from you the taxes you have to pay.
I realize other countries have different tax laws. Even if you did deduct 100% of the money right off the bottom line of your taxes it is still money you do not have in your pocket. Whether you paid it to the software company or to the government its still money you do not have in your pocket.
Unless there is some weird tax law somewhere where the government is paying you to lease software buying software will always save you money in the long run rather than leasing. How long depends on the different price options. And it may takes years to pay for itself.
jlasman said:Floyd, as you probably know, in the U.S. in a true software lease, the entire amount is expensed. So therefore, while you don't get your money back you do get the entire amount of the software expensed against your income before taxes.
Which is exactly what I am saying.
For arguments sake let's say your tax bracket is 30%. That means after all your deductions you have to pay 30% of you taxable income to the government.
Say you pay $300 in a year for a software lease. You can deduct that $300 from your taxable income. So by deducting that $300 from your taxable income you don't pay the government $90 that you would normally have to pay. Your net expense for the software for the year is $210. Assuming everything stays the same it will cost you $210 every year. If you lease the software for 5 years that means that license will have cost you $1050 in 5 years.
Say you pay $300 for a lifetime license. You can deduct $150 from your taxable income. So by deducting $150 from your taxable income you don't pay the government $45 that you would normally have to pay. Your net expense for the software is $255. After 5 years the license will have cost you $255.
So in the above example if you only plan on using a piece of software that cost $300 for one year then yes leasing is the way to go since $210 is less that $255. If you plan on using it for more than one year buying a lifetime license is the way to go.
For some reason tax deductions are confusing to people. Many believe that a $300 tax deduction means that is $300 less that they have to pay the government. Not true. It means you don't have to pay taxes on the $300 which generally be anywhere from 25% - 50% or even more. So the amount you don't have to pay the government is some percentage of the deduction. A tax deduction means you can subtract it from your taxable income. It does not mean you can subtract it from you the taxes you have to pay.
I realize other countries have different tax laws. Even if you did deduct 100% of the money right off the bottom line of your taxes it is still money you do not have in your pocket. Whether you paid it to the software company or to the government its still money you do not have in your pocket.
Unless there is some weird tax law somewhere where the government is paying you to lease software buying software will always save you money in the long run rather than leasing. How long depends on the different price options. And it may takes years to pay for itself.