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Tax Deductions for Business Vehicles
- An LLC can write off a car purchase if used for business. The deduction amount depends on the standard mileage rate or actual expense method.
- As a sole proprietor or single-member LLC, you report and deduct lease sales tax and car expenses like gas, repairs, insurance on Schedule C, Form 1040.
- Buying a car under an LLC provides tax deductions. An LLC can write off purchase price, ownership costs, gas, maintenance, and depreciation. Owning a company car also limits liability and projects professionalism.
Vehicle Expense Deductions for LLCs
- An LLC may write off 100% of a vehicle’s cost using a Section 179 deduction if the vehicle is used exclusively for business.
- The deduction amount varies depending on the vehicle’s size. For SUVs weighing over 6,000 pounds but less than 14,000 pounds, 100% of the cost can be expensed in the first year using bonus depreciation.
- Deduction rules differ for leased versus purchased vehicles. With a leased car, the monthly payments are deductible expenses. A purchased car can potentially be 100% deducted in the first year under Section 179 but isn’t as simple if financed.
Maximizing Tax Benefits
- Owning a company car limits liability and projects professionalism. However, to qualify for tax write-offs, meticulous mileage logs are needed to prove business versus personal use. If business use is under 50%, deductions will be limited. Consulting a tax professional can help maximize benefits.
