As a tow and repair business owner, your focus is on keeping trucks running and customers safe—not deciphering complex tax code. But the new tax rules for 2025 hold massive cash-flow opportunities for your shop.
RoadSync CEO Robin Gregg, along with tax principals Matt Abraham and Rosie Mercedes from CLA, recently broke down these changes. Here is your action-oriented summary, focused strictly on the deductions and structures that matter most to heavy-duty operations.
Watch the full webinar here or reach out directly to CLA or your tax professionals for clarification and best course of action.
1. Maximize Your Tow Truck & Equipment Write-Offs
The new tax law offers substantial savings, particularly by making it easier and more lucrative to deduct the cost of heavy equipment, new tow trucks, and shop tools. The Section 179 Deduction is a prime tool for immediate expensing, with its maximum deduction significantly increased to $2.5 million and the phase-out limit now at $4 million, making it a priority for eligible purchases. After reaching the Section 179 limit, Bonus Depreciation offers a massive follow-up deduction; for property acquired after January 19, 2025, a 100% deduction is permanent in the first year, requiring meticulous documentation of acquisition dates. Finally, the Heavy Vehicle Rule specifically benefits tow trucks and recovery vehicles, as SUVs and trucks over 6,000 lbs. GVWR can combine Section 179 and Bonus Depreciation for the potential to fully write off their entire cost, such as expensing an $80,000 SUV.
Critical Vehicle Deduction Choice
When deducting vehicle costs, you must choose one method per vehicle:
- Actual Expense Method: Deduct gas, maintenance, insurance, depreciation, tolls, and parking. This is best for tow trucks that incur high mileage and maintenance costs and have little to no personal use.
- Standard Mileage Rate: Simpler, fixed rate. This is best for employee reimbursements or personal vehicles used lightly for business (e.g., quick parts runs or bank deposits). The rate is now 70 cents per mile.
2. Reduce Self-Employment Tax with the Right Structure
As a business owner, self-employment tax (SE Tax) on your net income is a major cost, and the correct entity structure is your best defense. A Sole Proprietor or Single-Member LLC pays the 15.3% SE Tax on all net business income up to the Social Security cap ($176,100), though they do qualify for the permanent ~20% Qualified Business Income (QBI) deduction. If profits are high, this structure maximizes your SE Tax bill, and conversion should be evaluated. The S Corporation is the most common strategy for reducing SE Tax liability while still qualifying for the QBI deduction; with this structure, you only pay SE Tax on your reasonable salary, while remaining profits (distributions) are exempt. Business owners should consult their advisor about converting to an S Corp.
3. Handling Employee Tips: A New Deduction (Retroactive!)
Tips are becoming common in roadside repair. The new law provides a temporary tax deduction for tips—but you must document them correctly.
- The Deduction: For 2025 through 2028, employee tips are now an above-the-line deduction for federal income tax, capped at $25,000.
- Taxes Still Apply: Social Security and Medicare taxes still apply to all tips. The deduction only applies to federal (and state) income tax.
- RoadSync Advantage: The RoadSync platform now includes tip collection and provides the necessary employee-level reporting, simplifying compliance and payroll.
Action Item: This rule is retroactive to January 1, 2025. You must review your payroll logs and documentation now to ensure you capture and report all tips paid this year to take advantage of this new deduction.
Also, RoadSync offers Tips as of Fall 2025 so reach out if you’d like to learn more about how RoadSync and Tips can help your business!
4. Personal Tax Upgrades for Business Owners
Changes on the individual side of the tax code offer more financial flexibility:
- Lower Tax Brackets: The current lower income tax rates are now permanent.
- Increased SALT Cap: The deduction for State and Local Taxes (SALT) has jumped from $10,000 to $40,000, a significant win for owners who itemize.
- Car Loan Interest Deduction: If you personally finance a new vehicle in 2025–2028, you can deduct up to $10,000 in interest paid.
- Estate Planning Certainty: The generous estate tax exemption limit ($14 million per person for 2025) has been made permanent, providing peace of mind for passing on your business.
5. Next Steps
- Meet with Your Tax Advisor: Schedule a year-end planning session now. Discuss multi-year projections (2025 and 2026) before making major decisions.
- Purchase Equipment: Maximize the new, higher Section 179 limits by purchasing and placing eligible assets in service before year-end.
- Audit Your Logs: Ensure detailed tracking of business use for all listed property vehicles and guarantee all employee tips are properly documented for the retroactive deduction.
In a landscape of ever-changing tax regulations, staying ahead is paramount. The recent tax changes present both challenges and opportunities. To navigate these complexities with confidence and ensure your business is optimized for success, you need a partner with the right technology. Roadsync is designed to simplify your operations, keep you compliant, and give you the peace of mind to focus on growth. Ready to see how Roadsync can transform your business’s financial strategy? Book a demo today.