Buying A Car/Truck Through LLC

[Michael Glaser]

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?

[Brandon Hall]

@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.