What to Know: Section 179 for Auto Repair Businesses

|

|

Read time: 3 min

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.  

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 asset a little bit at a time over a five, seven, fifteen, or thirty-nine year period. To give an example, if a shop owner buys a new tire machine, they could either write off the taxes over a seven-year period, or they can 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 a web-based software and does not make users sign a contract, it is not eligible 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 building without expanding the footprint. Without Section 179, leasehold improvements depreciate over 15 or 39 years, depending on what the improvements are. 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 several years. Most recently, Section 179 was adjusted 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.

Section 179 for Auto Repair Businesses

When Should You Use Section 179?

If you know that you’re going to pay taxes this year, and you have made a major 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 major 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 just 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 major 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 make the purchase before the end of the year to leverage Section 179’s tax deductions.

Talk to 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 actually 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?"

Talk to your accountant to form a game plan for all of this.

This article was written with the guidance of automotive repair industry CPA Hunt Demarest of Paar, Melis, & Associates, P.C.

Need help planning your taxes for 2020? Contact Paar, Melis, & Associates.

👉 Ready to grow your automotive business? [Book a personalized Tekmetric Demo Here]

FAQ

More articles

G2 is a peer-to-peer review site that scores different platforms and tools just like Tekmetric based on reviews from users, just like you.

Leveraging all the data, reviews and input they collect throughout the year, G2 analyses the results and announces the clear software leaders in a number of categories.

And Tekmetric was named a leader in not one, not two, but FIVE categories for Auto Repair Software, and has been awarded five new badges from G2 for their 2023 Summer Spotlight!

That means its.. TIME FOR SOME BURNOUTS! LETS GO!

Those five categories include:

  1. Auto Repair Software Momentum Leader 
  2. Auto Repair Software Small Business Leader
  3. Summer 2023 Auto Repair Software Leader
  4. Best Relationship With Users
  5. Easiest To Do Business With

Sorry for the humble brag, but honestly, this is all because of you, the users of Tekmetric!

Shop owner's, service manager's and technician's love for how easy Tekmetric makes it to run your shop is the star of the show here.

When it comes to efficiency in an auto repair shop, a technician’s expertise and performance are paramount. The service advisor might be the face who interacts directly with vehicle owners, but technicians are the eyes and ears – the “pistons” – that run the whole system. As a technician, your ability to complete your day-to-day jobs efficiently and effectively is crucial to the shop’s overall performance.

Using data can help you maximize your own profitability as well as the shop’s. From identifying the problem to performing the diagnosis and completing the repair, data can significantly elevate your performance. Simply put, when you accurately and comprehensively leverage the data available through a system like Tekmetric at every step of a repair, you are going to perform more efficiently – to the benefit of the shop and your own career.

Concern: Ensure accuracy with data to identify the problem

When a vehicle is brought in with an initial concern, data can help you better respond to the customer’s needs communicated by the service advisor. By intentionally reviewing the data collected by the service advisor, you can better understand the reason the customer has brought the vehicle in for repair and ensure your diagnosis can uncover the true cause of the problem.

With Tekmetric, your job board and all the data it includes is your key to success. In fact, you can consider it your “digital clipboard,” as it includes all the details you need in one place. The job board shows approved estimates as well as completed work – so it’s your window into how efficiently you are addressing customer concerns, bottlenecks in the repair process and more. This tool enables you to follow up on questions or additional details so your service advisor can communicate with the customer. This in turn drives efficiency within the shop as you can ensure the customer’s concern is addressed promptly and correctly.

Cause: Utilize digital tools to make the correct diagnosis

Once a problem has been identified, you can also leverage data via digital vehicle inspections (DVIs) to document diagnoses and show the exact cause of the problem. This includes making thorough notes, including photos and videos and showcasing other issues you find that could need additional repairs. By leveraging digital tools to complete thorough inspections, you can become a diagnostic wizard, solving problems faster and more efficiently. This not only translates to happier customers who get their cars back sooner, but also lets you sell more work, boosting your productivity and earning potential.

The most important part of the digital vehicle inspection is clear photos and videos. By including the right number of photos in your inspection, you can educate your customer on their vehicle’s performance. However, be sure not to overwhelm the customer with information. Tekmetric has found that 6-8 photos on average is the sweet spot, although this may change with your customer base. 

A detailed DVI complete with photos allows the customer to review and approve the jobs they need the most, while planning for repairs that may come up in the future. As a result, you can educate the customer on the cause of their concern, share additional details if needed and simplify the communication process for you and the service advisor – ultimately increasing the average repair order (ARO).

Correction: Control the tempo of the shop’s workflow during repairs

Now that you have identified the problem, it’s time to complete the repair. As you work through your repair list, you can also use key metrics and information available on your job board to ensure you – and the shop overall – are working efficiently. For example, you can follow up with your service advisor on jobs you have inspected but are not approved for repairs. This helps drive the shop’s efficiency, so you can complete the work and get the car out of the shop to move onto the next one.

The other important aspect of the repair phase is collaborating with other technicians to better leverage each technician’s unique strengths and weaknesses. For example, if your specialty is brake replacements, you can work with your team to ensure you work on brake-related repairs. This helps streamline those repairs to you – the expert – so you can complete them faster and at a higher quality. In turn, the shop streamlines its overall processes, leading to more profit for the shop and for you.

Technicians are a critical part of a shop’s operations – but your role is not just limited to the actual repair. You can become even better in your role by using data throughout the customer experience: from the initial problem and diagnosis until the customer walks out with a fixed vehicle. In fact, utilizing data from the minute the customer walks into the shop leads to better diagnoses and more successful repairs. Learning how to use data correctly can help you perform at a higher level, ultimately increasing the profitability of the shop and growing your own paycheck.

"Innovation is the ability to see change as an opportunity—not a threat.” - Steve Jobs

Like any business owner, auto repair shop owners must consider all aspects of their business: operations, marketing, collections, bookkeeping, payroll, profitability, and customer service.

But how do you track, monitor, and gain control over these various business functions and analyze the relationship between them? Many shop owners turn to automotive computer programs as a solution, but there are a lot of options to consider. As you research automotive computer programs, you may be asking yourself:

Is it better to have one program for each business function, or one system that covers various aspects? What is the right mix of programs?

Tekmetric is a cloud-based shop management system; but that doesn’t mean all other software and systems out there align with what our software can do. Some automotive computer programs cover diagnostics, some focus on marketing, some focus on digital inspections, and there are some systems out there that check off most—if not all—the boxes.

There is a lot to consider when determining which automotive computer programs are right for your business, and we want to make sure your shop’s needs are met.

How Automotive Computer Programs Fuels Business Innovation

May 22, 2023

Read time: 3 min

read more