7.2. The Tax Effect
• Lease payments are expenses that can be
written off against income immediately. Loans
are depreciated over a longer period of time.
• One major advantage of leases over loans is the
impact leases have on land use.
• When a firm leases land for its operations, it can
easily deduct the lease expense for the income
burden. Purchased land, on the other hand,
cannot be deducted from tax obligations.