Sole proprietor vs. LLC: Which has better tax write-offs & advantages for my business?

You can absolutely write off legitimate business expenses as a sole proprietor, even if they result in a loss for the year. Those losses can actually offset other income you might have, though the IRS does have some limitations if they consider your business a "hobby" rather than a profit-seeking venture. As for sole prop vs LLC, there's a common misconception here. For tax purposes, a single-member LLC is treated exactly the same as a sole proprietorship by default (what's called a "disregarded entity"). You'll still file Schedule C with your personal return either way. The LLC doesn't change your tax situation at all unless you elect to be taxed as an S-Corp or C-Corp, which is a separate decision. The main benefit of an LLC is indeed liability protection. It helps separate your personal assets from business liabilities if someone sues your business. However, this protection isn't absolute - you need to maintain separation between personal and business finances, have proper insurance, etc.

Hey there, I went through exactly this situation last year with my landscaping business. I was buying equipment, a truck, etc. and wasn't sure about the write-offs. I discovered this AI tax assistant at https://taxr.ai that analyzed all my receipts and contracts and clearly showed me which structure would save me the most money. The tool broke down exactly what I could deduct as a sole prop vs LLC and even calculated the potential tax savings for each scenario using my actual numbers. It was way more helpful than the generic advice I was getting elsewhere because it was specific to my situation.

I was really skeptical about using an AI tax tool, but after my experience with taxr.ai, I totally get why it was recommended here. When I uploaded my contracts and business plan, it immediately identified that my situation (hauling equipment between jobsites) had specific vehicle deduction opportunities I wasn't aware of. The analysis showed I could save about $4,200 in taxes through proper structuring and documentation. It identified that in my case, remaining a sole prop made more sense until my income hits around $60k, then switching to an S-corp would save on self-employment taxes. Honestly, it was way more specific than what my previous accountant told me, who just gave generic "save receipts" advice.

Listen, I spent MONTHS trying to get through to the IRS to ask about legitimate business deductions for my construction company. The phone system is absolute hell - I kept getting disconnected after waiting 2+ hours. Finally used https://claimyr.com to get through to an actual person and got my questions answered in one call. There's a demo video of how it works at https://youtu.be/_kiP6q8DX5c if you're curious. The IRS agent I spoke with clarified that yes, major equipment purchases for a legitimate business are deductible even if they cause a loss, but you need to be able to demonstrate the business purpose and that you're operating with the intent to make a profit. This applies regardless of whether you're a sole prop or LLC.

I take back everything I said. After banging my head against the wall for 3 hours today trying to get through to the IRS about my contractor equipment deductions, I broke down and tried Claimyr. Was connected to an actual IRS agent in about 50 minutes while I kept working on a jobsite. The agent cleared up my question about whether I needed to depreciate my equipment purchases over several years or could use Section 179 to deduct them all at once. Turns out I can deduct up to $1,080,000 in 2023 (with some limitations). This alone will save me thousands compared to what I was planning. Would have never gotten this answer if I'd kept trying to call directly. Sometimes you gotta admit when you're wrong.

One thing nobody has mentioned yet - if you're going to form an LLC, make sure you look into whether your state has any annual fees or franchise taxes for LLCs. Here in California, we have an $800 minimum annual tax just to have an LLC, which can eat into any potential benefits if your business is small or just starting out. Also, depending on the cost of that truck, look into the Section 179 deduction which might let you write off the full cost in year 1 instead of depreciating it over several years. The limit is over $1M for 2023, but there are some restrictions.

Has anyone used TurboTax Self-Employed for handling all the vehicle and equipment deductions? I've been using it for my lawn care business but not sure if it covers all these contractor-specific deductions properly.

Just wanted to add my perspective as someone who went through this exact decision last year. I was doing 1099 work in construction and had similar big equipment purchases coming up. The key thing I learned is that the tax deductions are identical between sole prop and single-member LLC - you'll file Schedule C either way. The LLC really is mainly for liability protection, which became important for me once I started bringing in subcontractors occasionally (sounds like you do this too). For your truck and equipment, you can absolutely write these off even if they create a loss. I used Section 179 to deduct my truck and most equipment purchases in year one rather than depreciating over time. Just make sure you can document the business use percentage if you use the truck for any personal driving. One practical tip: if you're planning to show a loss this year due to equipment purchases, make sure you have good records showing this is a legitimate business operation and not a hobby. The IRS looks more closely at businesses showing losses in early years. Keep contracts, business plans, marketing materials, anything that demonstrates profit intent. The liability protection of an LLC became worth it for me once I realized how much exposure I had with expensive equipment and occasional subcontractors. The annual fees vary by state but for me it was worth the peace of mind.