As a small business owner, taxes are likely one of your least favorite tasks. Unfortunately, they are also one of the most important. Although there is no one particular loophole that will allow you to avoid paying taxes completely, there are tax deductions that can save you a ton of money.
Here are top auto repair shop tax deductions to keep in mind.
Everything you do to promote your business can be considered a tax deduction. Here is a quick list of things you can write off while promoting your business:
Whether you decide to utilize digital or print publications, the cost of ad placements is tax deductible. Consider the following:
- Newspaper ads
- Social media ads (Facebook, Twitter, Linkedin)
- Google Adwords
- Radio or TV commercials
Many companies create brand awareness through postcards, letters, brochures, and fliers. Luckily, these are all considered tax deductible.
Giveaways such as t-shirts, keychains, and bumper stickers also fall under promotional materials.
There are many components to hosting a website and fortunately all costs associated can be written off including:
- Website hosting
- Subscription and website themes
- Domain names
- Stock photos
Additionally, marketing software is considered advertising for your auto repair shop and can be written off as a tax deductible.
Business License and Permits
To open and maintain an auto repair shop, you will need several licenses and permits. The list and associated cost of each license or permit are as follows:
- A business license - between $50 and $100
- Insurance - $4,000 per annum approximately
- ASE certifications - one-time registration fee $36, $39 for each certification except L1, 2, and 3, you will have to pay $78 each.
- Commercial activity license and certification of occupancy - $200
Luckily, the cost associated with these licenses and permits is considered an expense and is eligible for auto repair shop tax deductions.
Both wages and benefits you provide employees are tax deductible, this includes:
- Health benefits
- 401(k) matches
- Employee commission
- HSA and flexible spending accounts
- Life and disability insurance
Services provided by contracted employees are also considered tax deductible. A contracted employee is someone you hire for a predetermined time for a predetermined price. You will not be required to provide them with traditional employer benefits like health insurance.
These employees are eligible for 1099 tax deduction and receive wages according to the terms of their pre-agreed contracts.
In order to run and manage your auto repair shop, equipment is a necessity. Each piece falls into one of the following categories:
- Expenses- A piece of equipment falls under the expense category if you want to deduct it at the end of the year. It can include things like nuts and bolts, brake pads, oil, and cleaning supplies.
- Assets- Equipment that depreciates over time is considered an asset. For example; if you bought a compressor for $3,000, its value will depreciate over time rather than at the time of the purchase.
Your auto repair shop’s inventory also falls under the tax deduction category. For example; if you bought 80 tires but only sold 20. You can write off the cost of the 20 tires you sold.
This can be considered on anything you list for sale from your shop.
According to IRS regulations, shop owners can deduct insurance as a business expense because it is a requirement. Insurance coverage an auto repair shop must have are the following:
- Commercial property insurance
- General liability insurance
- Worker compensation insurance
- Cyber liability insurance
- Errors and omissions insurance
- Garage keepers liability insurance
Easily Attract Clients and Save
By educating yourself on all the expenses that are tax deductible you can properly allocate your spending to areas that will benefit your shop and save money. For example, taking advantage of marketing software is a great way to grow your brand and client base and it’s also considered an auto repair shop tax deduction.
This is where BayIQ can help. BayIQ’s automotive marketing platform includes various solutions such as shop management integration, email and text marketing, loyalty rewards program, online reviews, appointment scheduling, andreporting. With BayIQ you can take your business to the next level by increasing your car count and average repair order- and write off the cost of doing it.