Taking legitimate tax deductions is one way to reduce the amount of income tax you must pay. So what are some the best tax deductions for auto mechanics? Barta Business Group, an accounting firm in Denver, Colorado, outlines what deductions most any business can take as well as specific points for auto mechanics.

Tax Deductions for Auto Mechanics: What You Need To Know

With the helpful insight of Barta Business Group, providers of small business accounting services in Denver, we can look at tax strategies for auto mechanics. This way you can save the most money on your taxes, potentially saving thousands of dollars from going out the door. 

For example, section 179 lets auto mechanics get big tax breaks for making large purchases such as heavy equipment and vehicles intended for business use. However, smaller operating expenses can really add up to give you significant breaks on your taxes as well. 

Let’s look at what those look like.

Which supplies and equipment can be deducted?

If you are self-employed, you can claim a deduction for the tools and equipment that you use on the job. If the items have a life of less than 12 months, they are considered supplies and you can deduct for their total cost. Anything with a life over a year, you must generally depreciate them, recovering your costs over the life of the item. Additionally, you may be able to take a section 179 deduction for the full amount of an item for the year of purchase if the property is tangible, and it qualifies per IRS guidelines. Lastly, you can deduct the full cost of supplies, such as shop rags or work mats.

Can I expense vehicles?

If you purchase a wrecker or other vehicle to use in your business with no personal usage, the IRS will let you recover the full cost through an annual depreciation deduction. If you use your personal vehicle in the course of your business, such as making a roadside repair, you can expense the standard mileage traveled or actual expenses. Keep in mind you can’t deduct miles for any personal trips or commuting to another job where you are an employee.

Can I deduct uniforms and clothing?

If you work for someone, you may be able to deduct expenses for buying and maintaining a uniform. This must meet two conditions through: your employer requires you to wear them and the clothing must not be suitable for wear outside of work. You can also deduct the cost of any protective clothing or gear required to perform your job safely, such as shoes with a nonslip sole or safety goggles.

Other deductions

There are a few other possible deductions that exist for auto mechanics. If you belong to a union, you can claim a deduction for your initiation fees and union dues. You can deduct the cost of your professional license if you live somewhere that requires it. If you maintain liability insurance, you can deduct the cost of your premiums. If you can justify membership in a chamber of commerce, trade organization, business league, or civic organization, you can deduct your dues.

Final Tips: Tax Deductions for Auto Mechanics

If you want to take full advantage of tax deductions available than keeping records of your business, the transaction is a must. If you fell behind on your record-keeping last year, then keep your records updated this year to make the most out of next year’s tax breaks. 

There is software out there that can help with this. Programs such as Xero and QuickBooks can import your transactions and help you sort them into business and personal categories. This kind of software can also help you file your quarterly taxes and estimate your upcoming tax payments so you don’t get hit with any surprises. With that, you can also write off the subscription fees or payments you make for the software as business expenses.

About Barta Business Group

Most businesses are great at their craft, but not great at the financial back of the house. Our team of bookkeeping, accounting, and finance professionals guides business owners in making better decisions, so they can focus on doing what they love in their business. We understand the peace of mind that comes from knowing your financial information is done right every time. We value being able to support businesses in turning financial data into actionable insights, so you may plot a course for your company’s future with confidence.