Should I lease or buy dental equipment?
On this page
- Key facts
- What's the difference between a lease and a purchase for taxes?
- How does the cash-flow math work?
- Which equipment fits leasing, and which fits buying?
- How do startups usually finance equipment?
- What should you ask before signing an equipment lease?
- How do you track leased vs owned equipment?
- Who should review the lease before you sign?
- How FloorStack helps
- Free tools for this step
- Frequently asked questions
- Sources
For most new practices in 2026, the answer depends on cash flow and taxes, not sticker price. Buying (often with a loan) lets you depreciate or expense equipment, up to $2,560,000 under Section 179 for 2026 (IRS Publication 946). A true lease turns payments into rent. Many "leases" with a nominal buyout are treated as purchases (IRS).
Key facts
| Item | Rule or figure | Source |
|---|---|---|
| True lease | Payments deductible as rent | IRS FAQ |
| Conditional sales contract | Treated as a purchase; recover cost by depreciation | IRS FAQ |
| 2026 Section 179 limit | $2,560,000; phase-out begins at $4,090,000 | IRS Publication 946 |
| Bonus depreciation | 100% for qualified property acquired and placed in service after Jan. 19, 2025 | IRS Topic 704 |
| SBA 7(a) | Can fund machinery and equipment; max $5 million | SBA |
| Chair life (A-dec) | Designed and tested for 20-year service life; 10-year warranty on new chairs | A-dec |
What's the difference between a lease and a purchase for taxes?
The IRS looks at substance, not the label. If the agreement is a lease, you deduct payments as rent; if it's a conditional sales contract, you're treated as the buyer and recover cost through depreciation (IRS). Under Rev. Rul. 55-540, the IRS says an agreement may be a conditional sale if, among other conditions (IRS):
- part of each payment builds equity in the equipment;
- you get title after a stated number of payments;
- you can buy it at a nominal price, or for a small amount compared with total payments;
- you pay much more than fair rental value;
- part of the payments is designated as, or easy to recognize as, interest.
A common "$1 buyout" lease often fits that description. Ask your CPA how each offer will be treated before comparing them.
How does the cash-flow math work?
Compare the same equipment, term and total cost:
| Factor | Buy with a loan | True lease (FMV) | $1-buyout "lease" |
|---|---|---|---|
| Upfront cash | Down payment, if any | Often first payment(s) | Often first payment(s) |
| Monthly payment | Principal + interest | Rent | Principal + interest, labeled as rent |
| Tax treatment | Depreciation; Section 179 or bonus may apply | Rent deduction | Usually treated as a purchase |
| Ownership at end | Yours | Return, renew or buy at FMV | Yours |
| Fits long-life gear | Yes; A-dec designs chairs for 20 years | Less so | Yes |
Tax-law sources: IRS FAQ; IRS Publication 946. Chair life: A-dec.
A simple test: total every payment over the term, add any buyout, and compare with the cash price plus loan interest. Then ask your CPA what each option does to taxable income in year one, when Section 179 or bonus depreciation can front-load deductions for purchased equipment (IRS Publication 946; IRS Topic 704). This page is not tax advice.
To model equipment payments alongside your build-out budget, the free build-out cost & timeline calculator (coming soon) is planned to combine square footage, operatory count and region into a budget and schedule.
Which equipment fits leasing, and which fits buying?
| Equipment | Typical lean | Why |
|---|---|---|
| Chairs, delivery units, lights, cabinetry | Buy | Long service life; A-dec designs chairs for 20 years (A-dec) |
| Compressor and vacuum | Buy | Infrastructure tied to the room |
| Computers, servers, network | Lease or short-term finance | Replaced every few years |
| Scanners, mills, CBCT | Either | Fast-moving technology; check upgrade terms |
How do startups usually finance equipment?
Often inside the startup loan. Curve says most startups qualify for $350,000–$500,000 covering build-out and equipment (Curve Dental), and SBA 7(a) loans can fund machinery and equipment purchases, up to $5 million (SBA). Separate equipment leases add another lender and another set of terms. See dental build-out financing and the startup equipment budget.
What should you ask before signing an equipment lease?
- Is this a true lease or a conditional sale for tax purposes?
- What's the total of all payments plus the buyout?
- What's the end-of-term option: FMV, fixed price or $1?
- Who maintains and insures the equipment?
- Can I upgrade mid-term, and at what cost?
- Is there a personal guarantee or blanket lien?
- Does the landlord need to sign a lien waiver? Dental leases often address lender lien waivers (Saalfeld Griggs).
How do you track leased vs owned equipment?
Keep both in one inventory with ownership status, lender, serial number, payoff and end-of-term date. That record matters for insurance, taxes and any future sale. The free equipment inventory & appraisal report (coming soon) is planned for this; see the dental equipment inventory template.
Who should review the lease before you sign?
Ask your accountant to review the tax treatment for your situation and your attorney to review the lease terms, especially the end-of-term options, insurance requirements and what happens if the practice is sold. Compare at least two financing offers side by side on total cost, not only the monthly payment. Ask each lender for the full payment schedule, any fees, the end-of-term buyout terms and the conditions for early payoff, and put the answers in a simple table. Keep the signed lease or loan documents with the equipment records, so ownership is clear when you refinance, add equipment or sell the practice.
How FloorStack helps
FloorStack is a dental build-out platform that connects each equipment decision to the budget and the room it serves. Start at the Dental Equipment Planning hub, and compare with leasing vs. buying the office itself.
Related guides: building an equipment proposal.
Free tools on the FloorStack dental build-out platform for this step: Build-out cost & timeline calculator (free tool, coming soon) and Equipment inventory & appraisal report (free tool, coming soon).
Free tools for this step
- Build-out cost & timeline calculator (free tool, coming soon): estimate budget and schedule from your square footage, operatory count and region.
- Equipment inventory & appraisal report (free tool, coming soon): build an equipment inventory with warranties and an appraisal-ready report.
Frequently asked questions
Is it better to lease or buy dental equipment?
For long-life items like chairs, buying often costs less over time. Leasing can make sense for fast-changing technology. Compare total payments and tax treatment.
Are dental equipment lease payments tax-deductible?
If the agreement is a true lease for tax purposes, payments are deductible as rent. If it's a conditional sale, you depreciate instead.
Is a $1 buyout lease really a lease?
Often not for taxes. The IRS treats agreements with a nominal purchase option as likely conditional sales.
Can I use Section 179 on dental equipment in 2026?
Purchased equipment can qualify, up to $2,560,000 for 2026, with a phase-out above $4,090,000. Ask your CPA.
Can an SBA loan pay for dental equipment?
Yes. SBA 7(a) loans can fund machinery and equipment, up to $5 million.
How long does a dental chair last?
A-dec says its chairs are designed and tested for a 20-year service life under normal use with maintenance.
Sources
- IRS: Income & Expenses 7, Lease or Conditional Sales Contract
- IRS Publication 946: How to Depreciate Property
- IRS Topic 704: Depreciation
- U.S. Small Business Administration: 7(a) Loans
- A-dec 500 Dental Chair
- Curve Dental: How to Start a Dental Practice, a Launch Sequence
- Saalfeld Griggs: Dental Lease Tenant Checklist (Aug 2016)
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