Give me a minute to establish a premise here — stick with me — it will be worth it.
As a mostly self-employed person for five decades I have almost always had a car that I lease for work. This saves an incredible amount of IRS paperwork when it comes to write offs compared with depreciating and buying a car and then deducting the portion used for work.
If your car payment is $500 a month and you claim you use that car 100% for work, you can deduct that expense on your taxes. In addition, you can take the standard 56 cent per mile business deduction. You cannot claim depreciation but you can deduct other business expenses like parking or tolls.
If you buy the car, you have to depreciate it which means spreading the deduction over the life of the car.
The amount of paperwork saved is significant and you are typically less likely to spawn an audit if you lease rather than buy.
From a car to an iPhone
Now just insert iPhone into the above sentences where I put the word car. This could be a boon to content creators who could wrap a bunch of Apple products and services into one rental payment per month. Less paperwork and by all accounts, depending on what Apple includes in such bundles, those of us who use the iPhone (you may be able to see this program extend to iPads, iMacs, etc.) for content creation will probably save money TWICE.
The first time would be in the acquisition of the gear. For this to be attractive to customers, Apple is going to have to make price concessions. But then you can more easily deduct these costs of “leasing” on your taxes saving you additional money.
Leasing a car typically leads to a lower monthly payment than buying one and I assume the same would carry over here. This would open up a pathway for content creators to acquire better quality hardware/software/services than they would under the old “ownership” system.
Getting more frequent upgrades
Another potential benefit is more frequent upgrades. I used to get a new car every 12-18 months when I leased my main business car. Since it’s just a “cost of doing business” thing like rent, insurance, accounting, legal, etc., there’s no need to hang on to the older models. And you’ll never face the possibility of unexpected repair costs down the road because your gear will (presumably) always be covered by a warranty like AppleCare.Â
If you live in a state with sales tax (45 of the 50 states — only Alaska, Delaware, Montana, New Hampshire and Oregon do not have sales tax) you will also pay less sales tax under a rental (lease program) because you will only be taxed on the portion of the gear that you use. In a car lease, if you buy a $100,000 car in my state … on that day, right then and there, immediately, you owe roughly $10,000 in sales tax. Ouch. If you lease a $100,000 car for $1500 a month, you only pay sales tax on the $1500 or $150 a month — which is a lot easier to swallow than one giant bill for $10k!
According to Bloomberg, Apple is planning on calling this approach a “subscription.” But no matter what you call it (a rental, a lease, etc.) it would work the same way and all the things I just detailed would typically apply.
Note: This is NOT a rent to own program. And those are NOT like leases and do NOT have the advantages I’ve discussed here. This new approach would reportedly be interest free (another cash savings) and would probably pay for itself from EVERYONE’s perspective. Win-wins are hard to find in today’s world, but depending on the details (and yes the devil is ALWAYS in the details) this could be huge win for the company AND it’s customers.
A win-win for iPhone users
I cannot find a downside to this. I mean really, how many of us keep our iPhone for five or 10 years? How many of us aren’t already thinking about the iPhone 15 on the day we pick up the iPhone 14?
Just as we do with cameras, lenses and laptops, a lot of us upgrade as often as we are able. This just puts a wrapper around that behavior that makes the process more manageable and more productive.
Who knows if this will all ever come to fruition, but if it does, don’t automatically groan and say “I hate subscription services.”
This isn’t a lifelong subscription to Adobe photo apps we’re talking about. This is a whole new ball game. Stay tuned, because as this unfolds, my pal Jefferson Graham and I will be bringing you all the details on our free, weekly podcast called the iPhonePhotoShow.
P.S. I am not a lawyer or an accountant and cannot offer advice on either. I direct interested readers to check with certified accountants and licensed attorneys to verify how, if, when the things I’ve discussed here will apply to you. Also, if you live outside the US, there will be obvious differences in how this applies to you so check with your local authorities if Apple brings this feature/service to your country.
Excellent article. Something for sure to think about. But what about if you are retired?
Thanks Roy – it may be less appealing to retirees unless that still do work from home on their own businesses, etc. We’ll have to wait until the details are published to see exactly how it fits for each of us.