In 2023, almost 90% of American adults over 25 had a driver’s license. With the hustle and bustle of life, vehicles go from a luxury to a necessity. Add in owning a business, and you’re bound to save both time and energy if you have access to a car.
You might’ve been borrowing other people’s rides or even walking or biking to make company operations happen. But this isn’t sustainable, and it’s about time you get your own set of wheels.
Can an LLC write off a car purchase though? Read on to see the answer to this question and more.
Can My LLC Buy My Car?
Let’s first find out if you can even buy a vehicle under your LLC.
The good news is that you can do this. In fact, there are several advantages to buying a car under your LLC instead of your own name.
First of all, it gives you more privacy. When anyone checks your vehicle for its owner, it’ll come up with the LLC’s information instead of your personal details.
However, do keep in mind that they can dig deeper and look at your company’s articles of organization if they wish. This will have information about the LLC owners.
Another benefit is that there’s limited liability, meaning that your personal finances are separate from the LLC’s. So in theory, if a creditor came after you for debt collection, they can’t take your car since it’s the company’s property. Also, if you get in an accident, you personally won’t have to pay for any damages; that money would come from the LLC instead.
Lastly, there are certain tax benefits of buying a car under an LLC. You can actually deduct your vehicle expenses, although you’ll have to keep highly detailed records to properly do so.
So if you’re convinced at this point, form an LLC before buying a car. You can use our business registration service for a smoother and faster experience.
Can an LLC Write Off a Car Purchase?
The simple answer is yes, you can write it off when buying a vehicle under an LLC. As you might’ve guessed, there are several requirements for this.
Over 50% of the vehicle’s use must be for business purposes if you want a partial write-off. Otherwise, for a full write-off, it has to be used solely for your LLC’s operations.
Not only that, but it also has to be a four-wheeled passenger vehicle, SUV, van, or truck. If you own an SUV and it weighs between 6,000 and 14,000 pounds, you can only get a partial deduction. In addition, you can’t write off this purchase if you already have a fleet (five or more vehicles).
If your vehicle meets the requirements, then you can elect the Section 179 deduction. This deduction is intended for business equipment or software that’s bought during the tax year. Typically, you’d report it on your tax return by filing IRS Form 4562 if you bought the car before December 31st of the tax year.
Can You Write Off a Secondhand Car Purchase?
What’s great about the Section 179 deduction is that you can use it for used equipment too. Just make sure that the secondhand vehicle you’ve bought meets the qualification criteria.
What about leased cars? The lease payments can be deducted as well.
Can You Write Off a Car Loan?
We have more great news for you: if you need a car loan to purchase a vehicle for your LLC, you can write that off too. More specifically, you can write off the interest on the loan. Do note that you can’t deduct your principal payments.
What Else Can You Write Off?
What’s good to know is that you can also deduct related expenses for your vehicle. For example, you can deduct auto repair bills, insurance payments, fuel costs, and more. You can also claim the depreciation on your car.
Of course, you’ll have to keep detailed records for the IRS to allow those write-offs. So make sure you keep all receipts, invoices, etc.
Disadvantages of Buying a Car Through Your LLC
All of the above information may seem great, but there are some disadvantages you should be aware of. That way, you can make a better-informed decision.
For instance, you might enjoy tax benefits when making such a purchase. However, you’ll have to work hard to prove to the IRS that you’re using the vehicle for business purposes. Not only do you have to send in a written statement, but often, you’ll have to attach supporting documents as well.
In addition, some states charge an annual property tax on vehicles. This can be an additional financial burden you don’t want to take on, so it’s wise to check with a tax professional.
Lastly, if you need to take out a car loan, interest rates are usually higher for businesses than for individuals. You’ll probably have to pay more for auto insurance too.
Consider Buying a Car Through Your LLC
Can an LLC write off a car purchase? Yes; not only can you buy a vehicle with your LLC, but you can also write it off come tax time.
Despite these benefits, you should educate yourself on the possible drawbacks, as this can prevent unpleasant surprises from occurring. If you aren’t sure of what scenarios are possible, then it’s always smart to speak with tax and legal professionals.
Are you interested in forming an LLC? Then sign up with Business Anywhere now. You’ll have a business up and running in no time.
