Tax implications of leasing vs. purchasing: a comprehensive analysis of the impact on firms and government tax revenue

The decision between leasing and purchasing can significantly influence a firm's tax responsibilities, potentially impacting government tax revenue. This study aims to conduct a thorough analysis and measurement of the tax implications on the asset's user or lessee, lessor, and government tax revenue. It also considers the revised U.S. Generally Accepted Accounting Principles (GAAP) standard under ASC 842 and the Tax Cuts and Jobs Act (P.L. 115-97), which have been recently implemented. Through analytical and numerical examinations, our objective is to provide a comprehensive understanding of how leasing practices impact the financial position of firms and government tax revenue.