Any of you that own a business ever buy a car FOR the business?

Locust Fork

I've been uploading pictures and my eyes can't take more of this computer, so I will be checking the posts tomorrow to see if you guys can tell me how this works.

I have an LLC business and I am thinking about buying a car in the future.    I've got to figure out what my options are.    I need a LARGE vehicle for the transportation of merchandise and to take on the trips that I make to pick up collections.    Otherwise, I can get around in a smaller, more economical vehicle.   

I've never been a fan of leasing vehicles because it seems you never own the car and the payments NEVER end.     I like the feeling of owning the thing I pay for, so unless someone explains how that is a good move I don't think I'll go that route.

The Traverse has over 200,000 miles on it.   Its in ok shape for now, but its not long before it will have to be replaced. 

If I buy something like a Toyota Rav4 or such as a "get around" vehicle it will work for most things, but not the BIG trips or the retail store I visit every month to pick up 50 guns or so.

Should I rent a car every once in a while to do the big trips?    Can I put a car payment in my business name and get ANY kind of tax break on that?   Is it better to just claim mileage and leave the car out of the business name?  

nunn

I never checked into it, but I seem to recall hearing about a full price tax deduction for business vehicles of a certain GVW.  At the time, the Volkswagen Tiguan, a fairly large station wagon, was eligible.  Maybe check with your tax pro.

Junkballer

So many changes in our tax laws since I sold my businesses but at one time it was depreciation on purchases could last only for a certain amount of time with deductions getting smaller each year......leasing was forever a total write off. I speak of true corporate leases, not the hyped up sales tricks offered today. We leased as advised at the times with no problems. I'm out of the CPA needing loop now thankfully   but do highly recommend them.

randomnut

IIRC, last year there was a 25K credit? On commercial vehicles above 8k gvw. If that remains this year we will add 2 service trucks to our fleet

Butchdog2

2 cents.

If you have two vehicles, use "one" for the business entirely and the other for what ever you like, even claim mileage on the second one when you run business related items with it. Should be no problem.

My business owns a Traverse and it is titled as a truck.

select-fire

https://www.efile.com/tax-deduction/mileage-rates/

I would also advise speaking with your tax person and asking them to go back and amend the previous tax yr on mileage, insurance, vehicle taxes.

Locust Fork

I've got a tax person, she is good at keeping me grounded......everything would be a business expense if it were up to me.       Mileage is how we have dealt with getting some credit for all the wear and tear, fuel and such so far.....but knowing I'm about to have to buy a vehicle I thought I'd better explore the options.    

I wouldn't buy a huge vehicle except for the business part of things....so I should get some kind of tax break on this thing since it is for work.

We put a lot of miles on everything we drive because of how far out we are from everything.    Its an hour drive to get to any type of civilization.    All these work trips to far off places mean I cannot risk a vehicle that isn't in good working order.    200,000 miles is pushing past my comfort zone.

mogley98

I inquired of my accountant the same thing, she says mileage is better for me and will come out about the same. However if you can use the section (I think) 179 deduction (IE: you can shelter some profit) you may be better off buying, I believe it is dependent on quite a few factors and you should check with your accountant in my opinion.

Horse Plains Drifter

Butchdog2 said:

If you have two vehicles, use "one" for the business entirely and the other for what ever you like, even claim mileage on the second one when you run business related items with it. Should be no problem.

This is what we do.

Bubba Jr.

Back when I had the camera business I traveled all over the eastern US. I leased a new Mercury Villager every 2 years, then a Mountaineer, then a couple of F-150's. They were all covered under warrenty while I had them, so the only thing I had to pay for was gas and oil changes. I just wrote off the milage. This worked for me for 20 years.

sharpshooter039

I am sure it’s changed since I retired but I held an LLC for years.. being such had to file 2 tax one personal one business. My accountant had me buy the vehicle and I leased it to the LLC .. now it could only be used for business but since I was a sales service rep with a home office 95 % of my travels was business and if we went anywhere on the weekends we just used the wifes car..

neacpa

In most situations, one is better to use the standard mileage rate instead of the actual expenses.  Either way, you have to keep up with your business mileage.  If you use the actual expenses, and you drive a total of 30k miles with 27k of those being business, then you can deduct 90% of all your expenses, (depreciation, fuel, insurance, repairs, interest, etc).  Or you can just simply multiply the 27k by the mileage rate for  that year (58 cts/mile for 2019, 57.5 cts/mile for 2020).  The standard mileage rate covers everything for that vehicle except for the interest paid on the note.  You can take the interest in addition to the standard mileage rate.  And you do not have to keep up with all the expense tickets, just the business mileage.  Primarily one of the few times the actual expenses is beneficial is if the taxpayer needs a "sudden impact".  What I mean by that is if someone realizes in December they are going to have a large tax bill.  Then they can go buy a vehicle and use the accelerated depreciation to give them a large deduction for that year.  The magical GVWR for a vehicle is 6,000 lbs.  If the GVWR is less than 6,000 the most that can be deducted is $18,100 in that year.  If the GVWR is over 6,000 lbs then between Section 179 and bonus depreciation or just by using the bonus depreciation, all of it can be written off.   Not all states recognize Section 179 or bonus when calculate the income on which to pay state income tax on.   But people need to realize if the auto is financed, then the later years when they are making those payments on it, they will not be getting very much, if any, deduction on it because they took so much depreciation on it in the first year.  If you take accelerated depreciation on a vehicle, you cannot switch and take the standard mileage rate on that same vehicle in later years.  Sorry for long post, but trying to explain the variables.

asop

I just dissolved a Ltd. Partnership due to there many tax changes in the past 15 yeas or so.  Std. deduction is per mile.  This year's I believe it's .58.