# Soft Costs

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Last modified: 2026-05-29T19:39:17+00:00
Type: efin_glossary

## Summary

Costs beyond the equipment: delivery, installation, training, warranties, software.

## Content

Soft costs are the non-equipment costs associated with acquiring and deploying equipment. They include delivery and freight, installation, training, sales tax, software licenses bundled with the equipment, and similar acquisition costs that don't purchase the physical equipment itself.
What counts as soft costs

Freight and delivery charges
Installation (electrical hookup, foundation, mounting, networking)
Training (for staff to operate the equipment)
Sales tax (in states that tax the purchase)
Software licenses included with equipment
Initial supplies/consumables (tools, fluids, calibration kits)
Inspection and acceptance testing
Permits and inspection fees for installation

What doesn't count as soft costs

Ongoing maintenance and consumables after placed-in-service
Insurance premiums
Property tax
Loan origination fees and doc fees

How lenders handle soft costs
Most equipment lenders will finance soft costs alongside the equipment, up to a cap:

Typical cap: 15-25% of equipment cost
Above the cap: soft costs need separate financing or cash payment
Sales tax: usually rolled in regardless of soft-costs cap (treated separately by some lenders)

Example: $100,000 CNC machine + $15,000 installation + $8,000 training = $123,000 financed (soft costs total $23,000, under 25% cap).
Tax treatment of financed soft costs
Most soft costs are capitalized into the equipment's cost basis and depreciated along with it. This includes delivery, installation, sales tax, and "necessary to place the equipment in service" costs.
Some soft costs may be expensed immediately rather than capitalized:

Routine training (vs initial setup training)
Software licenses with shorter useful life than the equipment
Permits with annual renewal

Your CPA can advise on which costs to capitalize vs expense for tax purposes.
Why getting soft costs financed matters
Soft costs can be 10-30% of total acquisition cost. Financing them lets you spread the cash impact over the loan term rather than coming up with $15-30K cash on top of the down payment. Most prime equipment lenders accept reasonable soft costs without issue.