Trying to set up a top-notch business without a car is like trying to run as fast as you can without a good pair of sneakers – even though it is perfectly possible, your performance will not be equivalent to what it would be in the best conditions.
Is it possible for entrepreneurs to write off car expenses through a limited liability company (LLC)? Read on to discover.
Can I Write-off My Car for My LLC? – The Verdict
The first element to determine whether it is possible to write off car expenses through an LLC is the title of the vehicle. For example, let’s say an individual works as a freelancer through an LLC and took out a loan in the name of the business to buy a car.
Each month, the loan payments will be paid directly from the LLC’s bank account. In such a case, the vehicle will be used exclusively for business purposes, not to drive the freelancer to grocery shopping or other daily activities.
If the borrower took the loan in the name of the LLC and the entity is responsible for paying the amount, it is possible to write off 100% of the loan interest if the vehicle is used only for business purposes.
Under IRS regulations, LLC members must write off expenses using the agency’s standard methods and ensure full tax compliance throughout the whole process.
Actual Expenses Method
The actual expenses method allows LLC members to deduct all car expenses directly related to work, including the interest portion of the car loan. It is not uncanny to find self-employees running single-member LLCs and using the same car for personal and business activities.
In such cases, it is possible to write off only the portion of those expenses directly related to the business. For instance, if the owner of a single-member LLC uses a car for business 60% of the time but also relies on the same car for personal activities, it is possible to deduct 60% of the interest on the auto loan.
Other deductible costs include car expenses like gas, maintenance, auto repair, insurance premiums, and any other car-related operating costs. Also, it is possible to deduct depreciation on the value of the car.
Standard Mileage Method
Another method to write off car expenses to an LLC is through a standard mileage deduction. This method is generally complex to understand for most LLC owners, as all the deductible taxes must be included in the standard mileage rate set by IRS.
Accordingly, if you opt for this write-off method, you must write off the car expenses for every mile driven for business purposes. As expected, this method requires detailed tracking and proper documentation using a mileage log.
Please note that commuting miles do not count toward the IRS mileage rate and several costs are not part of the calculation, including tolls, parking fees, car washes, and other expenses.
Do You Want to Write-Off Car Expenses to a Limited Liability Company (LLC)? – Immediately Contact an Expert CPA
Each LLC has unique purposes and needs, which require in-depth assessment and assistance from an experienced accountant. Waste no time – contact Edward D. Quilca, CPA by calling (786) 310-5582 or emailing [email protected] to find the best tax strategy for your case.
