What to Know: Section 179 for Auto Repair Businesses

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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.

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

The checkered flag is in sight, moving to the last stretch of the race at a good pace! As Tekmetric kicked off Q3, we focused on two main priorities: streamlining the customer experience and enhancing our relationships within the auto repair industry. With a customer-obsessed approach, Tekmetric is committed to driving product innovation through these two avenues, as we continue to evolve and better serve you – our partner shops.

Streamlining the Customer Experience from Beginning to End

This quarter, we made it our goal to continue helping shops improve the customer experience from start to finish. The customer experience involves streamlining operations at every level, so the vehicle can be safely repaired and back on the road as soon as possible. From estimate to the final payment, our end goal is to help you be as efficient as possible.

As part of our efforts this quarter, we sought to identify and eliminate bottlenecks to enhance shop efficiency while meeting customers where they want to be. We also implemented updates that many of you, our partner shops, have recommended to keep Tekmetric relevant to the entire shop experience. Together, these updates combine to create a stronger shop management system that helps your shop run smoothly and ultimately supports growth over time:

Simpler Day-to-Day With Enhanced Data Integrations: With ALLDATA and TireFitment, service advisors can now get labor and tire data directly from these integrations within the Tekmetric platform.
Tire Purchasing Made Easy: With Tire Suite you can manage all tire operations directly from the platform including compliance, regulatory standard adherence, inventory management, and even purchasing via our integration with PartsTech.
Increased Transparency in Inspections: Through our integrations with Advance’s MotoVisuals, you can now more easily educate your customers with repair animations. iCustomer Comms Simplified: We added template messages and the ability to adjust text verbiage for estimate, inspection and invoice links, which limits redundancy and streamlines communication.
Increased Payment Flexibility With BNPL: Our partnership with Affirm allows shops to meet vehicle owners where they are with flexible payment plans for nearly any budget or repair need, including Buy Now, Pay Later (BNPL). Customers who introduce BNPL see a 3x increase in ARO.

Growing Relationships Within the Industry

As Tekmetric continues to streamline and enhance the customer experience, we are also focused on strengthening our relationships within the auto repair industry. As a customer-obsessed shop management system, we aim to support shops in providing the highest quality service to vehicle owners they can – and this wouldn’t be possible without valuable feedback and insights from you, our partner shops. This approach allows us to better understand the real challenges you face, so we can provide innovative solutions that help you accomplish your goals and succeed in a market where the consumer expects more from their repair shops.

You may have seen us at the Shop Hackers Conference in Murfreesboro, Tennessee, where Adam McInturff, VP of Sales and Phil Acree, Head of Payment Sales presented on our latest features and upcoming innovations. We also spoke to many of you about the trends you are seeing in the industry and how Tekmetric can support your needs – from hiring service writers to succession planning. We continued these conversations at ATE Spokane in Washington and ASCCA in California and gathered key insights as we look ahead to the end of 2024 and the beginning of a new year.

Thanks to you and your key feedback shared through these conversations, Tekmetric has been able to provide excellent service and innovative solutions throughout this quarter, resulting in recognition from the G2 Summer Awards in these categories: Overall Leader, Best Usability, Most Implementable and Momentum Leader. In addition, Tekmetric was named the best auto shop management software by G2. This recognition is a significant testament to the support of each of you, your teams and the valuable insights you provide.

Aspiring To Inspire with Thought Leadership

For Tekmetric, customer relationships aren’t confined to the walls of a conference room. We also aimed to share the knowledge through webinars and conversations with industry outlets that sparked important conversations about what’s changing in our industry.

With our webinars, our aim is to help you uncover actionable insights that you can apply to grow your shop. Some of these conversations included our webinar, “Innovate to Elevate,” led by John Phelps, Director of Channel and Partnerships, where he talked about transforming the customer journey with the end goal of streamlining operations and boosting customer satisfaction. Similarly in our payments webinar, Phil Acree, Head of Payments covered the current state of consumer financing and how shops can enhance the customer experience regarding the payment process.

We also shared this knowledge through key industry outlets, so you can share and discuss with your team, including:

Future proof your shop exit strategy. P.J. Leslie, Director of Business Development, along with Matthew Schwab, owner of Clutch Automotive, shared tips to prepare your shop for the future and retirement by building a well-crafted exit plan so exiting shop owners can confidently step into the next phase of their lives, knowing they have set up a legacy for their shop.
Strategic use of evergreen and real-time data. We also published an article with Vehicle Service Pros titled, “Using numbers to supercharge your shop’s performance, where we discussed how to use real-time and evergreen data to expand your shop.

As we leave an upbeat Q3, Tekmetric continues to keep its eye on the finish line for this year: helping shops enhance the customer experience through product innovation. We are very proud that our commitment to a two-way relationship with our customers has been the driving force behind every improvement and our collaborative approach with other leaders in the industry enables us to build a steady foundation for continuous innovation. We aim to continue measuring up as we enter the final quarter of 2024.