Owning a vehicle in my LLC: Tax Questions!

[Drew Whitson]

My wife and I have an LLC which holds a small portfolio of single family homes. I am considering purchasing a vehicle to be titled in the LLC. My thinking is that the deprecation + gas + insurance + maintenance is, in total, much larger of a tax shield than simply taking the standard mileage deduction, at least for the number of miles I drive.

My questions are: How do I treat personal miles driven? Also, are there a minimum number of miles I must use the car? Could I use it for exclusive purpose of the business an only put on 1,000 miles? There are easy simple iPhone apps that can make business/personal miles easy to track. I would assume personal miles create a tax liability by mile driven based on the standard rate.

What is the standard deprecation schedule for a vehicle in an LLC? I believe it is 5 years but am not sure if it is treated as a straight line schedule, meaning 20% per year. Finally, do any vehicle maintenance costs need to be capitalized? Tires, for example, have a useful life more than one year; however, this may be over-thinking it.

Even after depreciation, my rental business is creating a lot of taxable gains so I'm trying find reasonable ways to lower my taxable income and owning a vehicle is one of those strategies.

Thanks for you help fellow BP-ers!!

[Chris Winterhalter]

@Drew Whitson

I've owned quite a few vehicles in my business (mainly work trucks & vans) however I've only owned one car. The IRS can more suspicious of personal use when you own a car in your business depending on what you do and where you do it. I travel a triangle from Cincinnati, to St Louis, to Chicago quite a bit so most of my miles are actually business travel (about 90%). I believe your CPA can add up all of your mileage and make a determination of what percentage is business use and what percentage is personal use. Just to reiterate, records are very important when you factor in personal use.

• You need to keep a mileage log...you can use apps like milebug to make the process easier however I find this to be the hardest part of the process. If you don't have a mileage log the IRS can dismiss your write offs. Each trip needs to have a business purpose.
• All expenses should be paid for out of the business. I would imagine you could pay for it personally and get reimbursed with the proper paperwork by your business however it's just not as clean.

I believe there are maximums on depreciation per year that can change. There are a lot of different IRS codes that give bonus depreciation on certain vehicles. I'm still somewhat unclear on this and would love some clarification from others in the group.

*No tax or legal advice