True Lease

If you’ve ever rented an apartment you most likely had a true lease. This means the lessor (the person who owns the property) can depreciate the property and list it as a deduction on his or her taxes. If the lessee (the person who is paying the rent) owns a business, they will most likely be able to deduct the rent on their taxes.

On the other hand, there are financial leases. Those lessees are responsible for maintenance of the building and can also take the depreciation deduction as opposed to the owner. So let’s say Jack’s Accounting Services decides to take out a true lease on an office building owned by Lease Cheap, Inc. for $500 a month. Lease Cheap can depreciate the value of the building, but whenever the roof leaks they will have to fix it at their expense.