LAUREL, Md. — For a lot of dry cleaners, tax season happens to them. A shoebox of receipts goes to the accountant, and a number comes back. They either smile or wince.

Dave Coyle used to operate the same way.

“I was in reactive mode when it came to taxes. I was playing a little bit of the blame game,” says Coyle, owner of In The Bag Cleaners in Wichita, Kansas, and the Maverick Drycleaners coaching service, during a recent webinar hosted by the Drycleaning & Laundry Institute (DLI). ”I expected my bookkeeper, my accountant or someone who I saw as a strategic advisor to be the one who keeps me from having a big tax bill.”

What changed for Coyle, he says, was realizing the federal tax code wasn’t working against him. It was built for him.

Editor’s note: The strategies discussed in this series are presented as general information only. Readers should consult their own tax professional before applying any of them to their individual business.

“The tax code in general has been written in a way that it’s meant to facilitate growth in small and medium-sized businesses,” Coyle says. “(Those businesses) are literally the heartbeat of what makes the United States run.” 

The cleaners who capitalize on that, he says, tend to be the ones who stop waiting for their accountants to hand them a plan.

“If you have an accountant who says, ‘Hey, you made a lot of money, you’ve got to pay a lot of taxes’ — that is not my favorite accountant,” Coyle says. “That person is not going to have you on the leading edge of mitigating taxes.”

One thing worth knowing before going item by item: the IRS permits amended returns for the prior three years. Even strategies a cleaner hasn’t used before aren’t necessarily off the table for taxes already filed.

“You can go back three years,” Coyle says. “The cool part is, even if the tax code has changed in those three years and made a difference, you can go back as well with that.”

The Augusta Rule (IRS Section 280A) allows a homeowner to rent their home to their business for up to 14 days a year. The personal income is tax-free. The business gets the deduction.

“Can you have an event there? Can you have a board meeting there?” Coyle asks. “You’ve all been on Airbnb sites. You’ve all been on VRBO. Just think of your home and what it could potentially rent for a day, and take it times 14.”

The accountant will want documentation: home details and square footage, meeting agendas, attendees, minutes and comparable local rental rates pulled from actual listings. The point, Coyle says, is to make the arrangement defensible.

“The whole goal of what we’re trying to do here is create tax-free personal income and get the business deduction,” he says.

Put younger children on the books, pay them a reasonable wage for actual work, and the income shifts from the owner’s higher tax bracket to the child’s. Up to a certain threshold, that income isn’t taxed at all.

“If you have children who are not on the payroll right now, you are leaving money on the table,” Coyle says.

He’s speaking from experience. “I’ve got a third grader and a fifth grader at home, and they’re on the payroll. They do marketing stuff for us. This week, we’re going to be designing a new ‘we miss you’ card, and they’re probably going to be the stars of that postcard.”

The wage has to match the work, though.

“You can’t pay a four-year-old $300 an hour to be in some ads,” Coyle says. “That’s not reasonable.”

Section 179 and bonus depreciation let businesses write off qualifying equipment (presses, boilers, vehicles, POS systems, etc.) in the year it’s placed in service rather than depreciating it slowly over time. Coyle says the common misunderstanding is what the deduction actually does.

“For a long time, when I was younger, I thought, ‘Okay, if I deducted, I just take it off of the taxes I owe. So, if I buy a $60,000 piece of equipment, I’m going to pay $60,000 less in taxes.’ No. You’re going to make $60,000 less in profit, which means that you have less tax liability.”

Timing matters, too, and sooner isn’t always better.

“If you have more profit a year from now, that deduction may be more valuable to you next year than it is this year,” Coyle says. 

Route vehicles come with their own rules. Heavier vehicles, roughly 6,000 pounds and up, can qualify for accelerated deductions that sometimes let most of the purchase price be written off in year one. For lighter vehicles and mixed-use situations, Coyle says the real question is whether mileage tracking or actual-expense tracking produces the bigger deduction over time, and whether personal vehicles used partially for business can be brought onto the business insurance policy.

For cleaners who own the real estate housing their plant, a cost segregation study can unlock depreciation that would otherwise be spread over decades. An outside firm can go through the building and break out its components, plumbing, electrical and improvements separately from the structure and land, which lets the shorter-life pieces be depreciated on a faster schedule.

“Land is oftentimes very hard to accelerate,” Coyle says. “However, the building is.”

Whether a study pencils out depends on the size of the property and the depreciation available to accelerate. But Coyle says cleaners weighing a purchase should factor it in when running the numbers.

“A building might be much more palatable if it’s helping you to offset tax that you would otherwise pay on your quarterly or annual tax liability.”

Come back Tuesday for Part 2 of this series, which covers the structural decisions — entity type, reasonable salary, home office and energy credits — that shape a cleaner’s long-term tax position.