The Effect of the Tax Cuts & Jobs Act on Leasing: Evidence from the Past with Implications for the Future

New Foundation Report Reveals the Impact of Tax Cuts and Jobs Act of 2017 on the Equipment Finance Industry

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Overview

Two key provisions of the Tax Cuts and Jobs Act (TCJA)—bonus depreciation and the Section 163(j) interest deduction limitation—have had very different effects on the $1 trillion equipment leasing and finance industry. According to a new study released by the Equipment Leasing & Finance Foundation (Foundation), while bonus depreciation made equipment investment more attractive by allowing immediate expensing, it appears to have encouraged firms to purchase or finance rather than lease capital assets. In contrast, the interest limitation—particularly after it tightened in 2022 (changing from a 30% of EBITDA cap to a 30% of EBIT cap)—led to sharp increases in leasing, but not without a downside for lessors.