THA 099: The New Tax Law Impact on the Service Professional


 Your Learning Curve Never Sounded So Good

This episode is not intended to give advice on the tax law or accounting principles. Please check with a professional for all your tax or accounting requirements.

The Panel:

Reed Melis worked in public accounting for 7 years prior to founding Paar, Melis & Associates in 1992. Reed conducts seminars, currently through the Automotive Training Institute, to instruct and train automotive repair shop owners to increase their profits and understand their “P or L.” Reed and his wife, Gina, are parents of Ashley and Drew. Reed is proud of his daughter’s accomplishments in college. You will often see him watching his son on the soccer field on the weekends. Reed also loves the Classics, cars and rock music. He will often travel to see a concert out of state.

Hunt Demarest is Accredited in Business Valuation and a licensed Certified Public Accountant that has been with the firm since 2006. He specializes in business taxes, valuations and does consulting work with our clients all across the country. When he’s not in the office, Hunt enjoys spending time with his family, golfing, working on and racing his cars.

Gerry Frank has been in the auto repair industry for over 39 years, Gerry has worn all the hats. From technician, manager, owner and now business coach. Gerry still owns his repair shop in Cleveland OH and is a principal member in Repair Shop Coach, helping repair shop owners to work smarter, not harder. Gerry started working in a Shell station while in high school when gas was 69cents a gallon. 

Garry is known as the numbers guy – They say everybody has a special god given talent or superpower and for Gerry that’s the ability to see the holes in the bucket in any business by examining a few financial reports.

Key Talking Points:

• New 20% Deduction for Qualified Small Business Income (Federal Taxes)
  • You pay your taxes based on a 20% reduction in your profits. In other words, your tax base is on 80% of your profits if you are a pass-thru entity.
  • S-Corporations, Partnerships and Sole Proprietors are considered. Please check with your own accountant to see if your companies structure qualifies.
  • This is a new feature in 2018. You’ll see a ‘windfall’ this year and become the ‘New Normal’ for at least the next 5 years.
  • You may want to consider doing something with the monies you will not pay Uncle Same. Fund retirement, pay debt, set some aside for a rainy day.
  • Self-property rentals to yourself also qualify.
• 100% depreciation available for most asset purchases.
  • Include improvement to buildings, parking lots, roof, etc. (new structures are not)
  • Instead of depreciating over time you can take it all in this year. Having Uncle Sam pay for part of your improvement!
• Expanded Child and Dependent Tax Credits
  • New Law: If a child is under the age of 17 from $1,000 to $2,000 and the income range was opened to qualify.
  • Added new child tax credits, check with your accountant or tax preparer.
• Tax credits are better than a tax deduction. It is like getting cash.
  • A tax deduction reduces the income.
• Technicians that have written off their equipment purchases off their taxes are no longer allowed.
  • An opportunity for shop owners to consider buying technician tools. See previous podcasts on buying technician tools. An even strong reason to consider this especially if techs have been using this tax write off. Link to Episode on Buying Technician Tools:
    • Academy Episode 084 HERE.
    • Academy Episode 036 HERE.
  • Even employee based business expenses like the internet because of research for case studies or certifications.
• New Lower Tax Rates and Tax Brackets
  • This was not only a tax break for the rich.
  • Hunt and Reed are seeing a tax decrease on average of 3%
• Our employees see that your $1 million dollar shop makes you a millionaire.
  • Share the segment of your Profit or Loss statement that everyone can control so they understand where the money goes.
  • Break down, with your people, how the money is distributed to vendors, employees, benefits, rent, utilities etc.
• You need a power team of advisers: Attorney, Accountant, a Banker and a Financial Adviser.
• April 15th isn’t the time to do tax planning. Work with your accountant to review your tax strategy no later than September each year.
• Entertainment cannot be deducted any more. (Ball Games, Concerts, etc.) “The No Fun Rule”
  • Remove your Entertainment expense account.
  • Meals are 50% deductible. Summer cookout.
  • Meeting expenses are OK.
• Get the book ‘Profit First’ by Mike Michalowicz. Find it on the Books Page HERE.

Resources:

• A special thanks to  Reed Melis, Hunt Demarest and Gerry Frank and  for their contribution to the aftermarket.
• Books Page HERE
• Leave me an honest review on iTunes. Your ratings and reviews really help and I read each one of them.

RepairPal. Many of our industry’s high-quality shops have gone through an evaluation with an independent automotive team to ensure their techs are trained, they use the right tools, and their customers are happy. In fact, over 2,200 repair shops have met these requirements, have become RepairPal Certified and are getting new customers every month.

Why has the number of RepairPal Certified shops grown so much? These shops are proud to have passed the certification and value the new customers they’re getting, both from the 5 million monthly visitors to RepairPal.com and their partnerships with CarMax and USAA. Certified shops can cancel at any time, so RepairPal works hard to produce value for them. Learn more at repairpal.com/shops to learn more.

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