March 10, 2021
Operating any small business is an exercise in book balancing and bottom-line values – something about which many laundromats are well too aware. Often, tax season can be quite the hectic time for laundromat operators – a sudsy equivalent of tracking every quarter. Accounting for energy costs, rent, machine depreciation, and so much more can make it difficult to capture every exemption and benefit. Check with your accountant or tax advisor for their expert advice, but the following are some general tax benefits to consider:
Making Depreciation Work for You
First up, the most obvious but also the most impactful – choosing between Section 179 deductions and Bonus Depreciation, or whether to use both. Utilization is dictated by several factors: Total value of assets, categorical grouping of similar types of assets, and your business’ income vs asset cost – your tax professional can help you decide how to best use these for your business’ specific needs. The important thing to know about Section 179 and Bonus Depreciation is that they have been changed in recent years. Section 179 has been altered to currently allow further flexibility on when you take your deduction on an asset, while Bonus Depreciation has been amended to currently allow 100% of the cost of an asset to be deducted in the same tax year. Section 179 also currently requires that the deduction be no larger than your annual business income, whereas Bonus Depreciation isn’t currently limited in this way. The IRS official fact sheet offers more in-depth information and specifics on utilizing these benefits. Buying new commercial washers and dryers and laundry equipment has never been so enticing!
Intelligently leveraging your available deductible asset depreciation is the possible key to effectively paying less tax while potentially avoiding issues with the IRS. For example, if you purchased new coin-op machines and wanted to deduct their depreciation value; it may not make sense to claim it all in one year if you might end up in the 30% bracket because of a lack of deductions the following year. Claiming all of your depreciation at once can be enticing, but not necessarily fruitful. TaxAct has a wonderful write up on avoiding tax bracket increases, as well as a thorough explainer on how tax brackets work. Your tax professional can help guide your decision to best maximize your possible deduction options over the lifetime of your business.
It’s All in the Prep!
Tax season doesn’t have to spell dread! You just need to know where to look for savings! Whether you are seeking to purchase new washers, dryers or other laundry equipment, or are carrying over deductions from years past, don’t let tax season be your enemy! Proper documentation and tax preparation is the key to maximizing your deductions while maintaining proper tax responsibility.
WASH Commercial Laundry is your partner in laundry. With the possibility of incredible tax benefits currently afforded to small business, the time has never been better to bring your coin laundry into the 21st century with new, smart machines! Contact one of our representatives today to secure market leading rates on new washers and dryers including the Galaxy600 Series Huebsch front & top load coin machines, as well as a full line of Maytag, Electrolux and Wascomat vended machines!
This material has been prepared for informational purposes only, and is not intended, and should not be relied upon, as legal, tax, or accounting advice. WASH Multifamily Laundry Systems and its affiliates do not provide tax, legal or accounting advice. Please consult your own tax, legal and accounting professional(s) before engaging in or proceeding with any transaction.