Tax benefits of leasing

- We offer two general characterizations of the tax benefits of leasing.
- We rely on tax neutrality of present value or economic depreciation.
- One way compares actual tax depreciation with tax-neutral depreciation.
- The other compares actual rents with tax-neutral rents.

Financial economists view the tax benefits of leasing as transaction-specific functions of the tax effects of rents, depreciation, and interest attributed to lessors and lessees facing different tax rates. We offer two conceptual ways to characterize those tax benefits.