5 Tax Tips for Business Owners- Tip 1- Section 179 – Accelerated Write Off for Vehicle

In this video, Matt Blocki from EWA discusses five tax tips for business owners. These tips cover tax efficiency strategies, with a focus on Section 179, which allows business owners to deduct expenses related to their business car if it weighs over 6000 pounds. This deduction can lead to significant tax savings for high-income business owners but requires careful record-keeping and separate personal and business car usage. However, once you utilize Section 179, you can’t claim mileage deductions until you dispose of the business car. These tips aim to help business owners optimize their tax planning. Contact EWA for further questions.

Video Transcript

Hi, Matt Blocki with EWA. Today we are talking about five tax tips if you’re a business owner. So as a business owner, I’m sure you’re aware you pay your fair share in taxes. And as a business owner, there are ways to be as tax efficient as possible.

So we’re going to be talking about some common tips and tactics and then also some things that you may have not heard about. So the first tip we have is something that’s referred to as Section 179, and this has to do with your car.

So as a business owner, as it relates to your normal commute, you cannot deduct mileage. But when you’re going to see clients or other engagements, you can do what’s called a mileage route based upon the IRS rates, usually between $50 to you’re able to deduct off your tax return.

So for example, if it’s fifty cents a mile and you drove 10,000 miles, that’d be a $5,000 tax deduction. The other way you can use a car as a tax efficiency is to utilize Section 179. And Section 179 just states that if your car weighs over 6000 pounds, you can deduct up to the percentage that you have that car for business use.

So, for example, if you’re able to keep the clean books and records and the car, just to keep the math simple, was $100,000. And let’s say 90% of the time you use that for business use, $90,000 goes off a tax deduction.

If you’re in the highest tax bracket right now is 3007%, this would end up being a $33,300 federal tax savings if you utilize Section 179. Again, assuming the car was purchased for $100,000. It has to be put in use in the calendar year for which you’re taking the tax deduction.

And then assuming, obviously, if the books and records approve that 90% of the car’s use was for business, you could have it just as a business car. The IRS would most likely want to see that you have a separate personal car and that the two are clearly delineated.

This essentially is if you have, as a business owner, if you have a high revenue new year or high profit year, high taxable income year, and you wanted to take and accelerate a tax deduction, you can do this all in one year.

But once you’ve done this, you’ve taken mileage off the table. You cannot do this and take mileage deduction until you have disposed of this car. These are our five tips for tax planning. Please reach out if you have any questions.

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5 Tax Tips for Business Owners

5 Tax Tips for Business Owners- Tip 2- Use the Augusta Rule
5 Tax Tips for Business Owners- Tip 3- Use S Corp Election to Lower Salary
5 Tax Tips for Business Owners- Tip 4- Hire Your Children
5 Tax Tips for Business Owners- Tip 5- Implement a 401k and Cash Balance Plan

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