Section 179 for Auto Repair Businesses pdf

1. Section 179 for Auto Repair Businesses Legal Disclaimer: This article is written for informational purposes only and does not constitute professional financial advice. Please reference section179.org and a professional accountant for advice on financial planning and filing taxes. This article is a financial advice reference for the year 2020. Some part of it may stay relevant in the future and entirely upon the government to change any laws in future. As 2020 comes to an end, you might be thinking about all of this year's expenses and wondering what you might be able to write off on your taxes. You may even be considering whether or not to make a big purchase, weighing the tax deductions you could get if you bought it this year versus next. Is it worth buying that new lift before the year ends? Or should you put it off until 2021? What is Section 179? Section 179 of the IRS tax code allows business owners to write off the entire cost of a piece of equipment, renovations, or other assets in the first year instead of writing off an investment a little bit at a time over a five years, seven years, fifteen years, or thirty-nine year period. For example, if a shop owner buys a new tire machine, they could either write off the taxes over seven years or use Section 179 to get the entire deduction in the first year. What Type of Costs Qualify for Section 179? · Tangible business property, including machinery and equipment · Leasehold improvements · Computer software* *Is Tekmetric Eligible for Section 179? Generally speaking, off-the-shelf computer software that has been purchased outright is eligible for Section 179. Because Tekmetric is web-based software and does not make users sign a contract, it is not suitable for section 179, but it does qualify for a standard tax deduction. What are Leasehold Improvements? Leasehold improvements are any repairs or modifications that you make to your building or property, including adding a new roof, installing security or safety systems, and remodeling parts of your facility without expanding the footprint. Without Section 179, leasehold improvements depreciate over 15 or 39 years, depending on the improvements. With Section 179, you can receive the entire deduction in the first year. How Often Does Section 179 Change? Section 179 is typically adjusted every few years. Most recently, Section 179 was modified in 2018 when the deduction limit was doubled, and more types of purchases were made eligible. Section 179 may change again in the following years.

2. When Should You Use Section 179? If you know that you're going to pay taxes this year and you have made a significant qualifying purchase, then you may want to consider using Section 179 to save on your taxes and free up some cash flow for 2021. If you financed a significant purchase, you may want to consider how soon you plan on paying off that purchase and whether or not you would like to receive a tax deduction in the following years as you pay it off. For example, if you have a loan on a piece of equipment that you plan on paying over five or ten years, you may want to opt for the regular depreciated tax reduction so that you have money to offset those taxes in the following years. Should You Make a Major Purchase Before the Year Ends to Use Section 179? It's not the wisest decision to buy something to save money. It is true that Section 179, and tax benefits in general, are the best that they've been in years, but consider only making a significant purchase if it is already in your plan and budget. If it is something that you already planned on buying in the next six months, then you may want to purchase before the end of the year to leverage Section 179's tax deductions. Consult with the Auto Repair Accounting Experts Every situation is different. Take a look at what your tax rates are and ask yourself; · Is my income low enough this year where I'm reducing taxes at a pretty low rate? · What do I think the tax rates are going to be in the future? Or · Will this benefit me more in the coming years when I think I'll be making more money? Consult your accountant to form a game plan for all of this. This article has been written with the guidance of automotive repair industry CPA Hunt Demarest of Paar, Melis, & Associates, P.C. Disclaimer This article was written at the end of the year 2020. The subject matters may or may not stay relevant in the future. Please take a reference from this article and consult with your Tax Consultant to make sense of everything.