Buying A Car/Truck Through LLC

15 Replies

I'm leasing a car right now and in the market to buy a truck this December when the dealers are trying to move the end of year models. 

My LLC is in Kansas, I work in California.

My employer gives me a car allowance and mileage. I drive the truck back to KC a few times of year to work on and look for real estate, so the truck is used for a portion of the year on my business. I would also hold calls in the truck as I manage my properties as well as other real estate related calls.

What are the options I would have buying this truck through my LLC? Pros? Cons? Tax benefits?

@Michael Glaser If you use it for business then I think it is for business. Buy it through your LLC,. Contact your local tax man. lol

@Eric Gardiner Did you just “LOL” my post?

Yes, I realize I can simply ask my local tax man, which I will.

Though, the point of this forum is to hear different points of view, options and tricks
from various business owners, CPA’s, tax coaches and other professionals. I can’t get all of those nuggets of info from merely asking my local tax man. God invented Internet forums for people to discuss topics...

I work in the DMS software business servicing car dealerships. I also used to sell and finance cars. Couple questions I have. 1. Do you have established business Credit in the LLC name? because if not you will still have to be the personal guarantor on the loan. 2. Are you looking form some special deductions by placing it in the LLC? If you use the vehicle for business and personal. The IRS will require you to keep pretty strict records on mileage, Personal VS Business. You may also want to keep all tax/Maintenance records for your tax guy. If you do not have the established business credit profile to have the business finance the vehicle alone. I would work on this while continuing to drive your current vehicle and deducting the allowable expenses on taxes.

a couple of times driving to KC from CA and back is going to DESTROY your lease allotment. 

I'm an idiot and misread that....  this idea won't work if you have a frequent need for a truck, but what about renting one for the times you need to go KC and back? Would it be easier expense and require less capital upfront? Just looked and it's about 275/wk unlimited miles locally with hertz (and that's not even trying to get a better price). Commercial van even cheaper at like half that.

@Matt K.  I’m leasing a car now from a family member, but not past December. I’d be paying for the truck cash or half cash, half finance. So as I said before, leasing is out of the question 100%. I drive a TON for my W-2 job currently, so no lease.

The purpose of this thread was to find out if there are any benefits buying the car under the LLC OVER under my own name given my situation.

I think you missed the point of my post... but seems like you've got it all figured out. I was just trying to give you a different POV by freeing up some capital and reducing the administrative burden... 

Originally posted by @Michael Glaser :

@Matt K.  I’m leasing a car now from a family member, but not past December. I’d be paying for the truck cash or half cash, half finance. So as I said before, leasing is out of the question 100%. I drive a TON for my W-2 job currently, so no lease.

The purpose of this thread was to find out if there are any benefits buying the car under the LLC OVER under my own name given my situation.

I imagine it really depends on whether your LLC has any income and if it files any kind of tax returns. I'm guessing that you are primarily looking to see if you can wash out some of the cost of the purchase with tax deductions?

I am tagging @Natalie Kolodij@Brandon Hall@Linda Weygant as they will be able to give you more help. 

@Michael Glaser check out Section179(dot)Org

GRVW needs to be >6000 lbs. If a truck, you can write off entire cost (generally speaking). From a financial perspective, this is brilliant - you put $5k down on a $50k vehicle, write the entire $50k off, and receive $20-25k in tax savings. You're ROI on your $5k downpayment is 4-5x.

You don't have to buy a truck. You can also buy an SUX (luxury or not) and as long as you adhere to the 6000 lbs rule, you'll still be able to deduct the majority of the cost.

Ex. You buy a Tesla Model X for $120k. You write off $25k as Sect 179 leaving your basis at $95k. You then get a 50% bonus depreciation (only on new cars, not used) amounting to $47.5k. Our remaining basis is now $47.5k and our write-off thus far have been $72.5k. But then we also get the first year of double declining balance depreciation (straight line % multiplied by two) equal to $19k ($47.5k / 5 years x 2).

Total write off for buying a Tesla Model X = $91.5k. That doesn't include federal and state tax credit by the way.

Key is that your business needs the net income to support the write off. You cannot buy a vehicle and report a negative NOI as a result. It just stops when NOI hits $0.

Another key is that you must use the vehicle 100% for business use, otherwise you have to get involved with complicated formulas to book income in the years in which the vehicle was not used 100%.

Moral of the story - unless you are running a full scale enterprise and can afford two vehicles, one in which you use 100% for business, stick with leasing or mileage tracking.

As usual, the answer is "it depends".  There is no cookie cutter approach to taxation and definitely no "one size fits all".  

There are a whole host of factors involved as to whether or not this would be deductible as @JD Martin and others have alluded to.  It's very difficult as a CPA to answer this type of question without having a full understanding of the taxpayer's individual situation and the info provided isn't enough to make that determination.

The best advice was the first advice given (check with your own CPA).  However, the OP jumped down the throat of the person who suggested it, so I'll just step away from that scenario.  www.irs.gov will have the definitive answer for the OP.

Because new cars eat wealth and drop in value 'like a rock', I would never recommend going that route, especially for 'tax benefits'.   Either go all-in like Brandon suggests - 100% business use and super depreciate your already rapidly depreciating hunk of metal to help offset the awesome income otherwise being generated from your business - or drive the cheapest vehicle that will get the job done and track your mileage.  

LLCs are just pass-through so I doubt there is any benefit there.  Also harder to insure an entity-owned vehicle I have found.

I will mention @Russell Brazil .  Even though he leases and you can't do that with the miles you drive, he may have some insight as to how he handles the business/tax end of a vehicle he primarily uses for work.  

Signed, 

Could buy any vehicle I want but choose to keep my 22yo faithful $800 primary vehicle.  It will still be worth $800 in 10 years.  New ones drop about 40% in 4.

I know dangerously little about this topic. But isn’t it a C and/or S Corp that provides the great benefit for cars? As in you can write it into your bylaws that you provide a vehicle for yourself? Then the company owns the vehicle and you can use it for business or personal? I don’t know if this also applies to taxed as that entity type for an LLC.

Sorry for the big pile of nothing. Something is rattling around in the back of my head about this topic and I’m hoping someone else can tell you the facts.

Like @Steve Vaughan said I lease.  When you buy and depreciate the vehicle, I believe there is a cap on what the IRS lets you depreciate....but if you write off your lease payments I do not believe there is a cap.  This is why many real estate agents lease luxury vehicles.  When you factor in the tax savings, my Audi Q5 doest really cost me all that much more than my wifes VW Jetta.  Also when I negotiate my leases, I negotiate getting oil changes and servicing included into my lease so that I have pretty minimal upkeep costs.  I do always end up going over my mileage allotment, but I just tack it onto the next vehicles lease.

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