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BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Finance
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Experience:  Owner of a CPA firm
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How can we buy 2 cars under our business name? we have 2

Customer Question

how can we buy 2 cars under our business name? we have 2 companies , one is LLC and the other is S corp, we are in Florida, we are in the market now to buy 2 cars, a used one for maybe $5000 from an end user which will be paid cash , the other one will
be brand new froma dealer and will be financed. what is the best way to do that from an accounting and Taxes prospects. thanks
Submitted: 1 year ago.
Category: Finance
Expert:  BK-CPA replied 1 year ago.

Hello and thank you for your question.

The 'how' aspect of your question is straight forward: simply title each vehicle under whatever business you want to be the legal owner of it. A business may buy the vehicle directly or the owner of a business may contribute the vehicle as a capital contribution.

The optimal strategy for tax purposes will vary depending on your use of the vehicle and related costs.

For either vehicle, you may want to use the standard mileage rate for tax purposes. This is the alternative to claiming the actual expenses associated with the vehicle: depreciation, gas, repairs, etc. Corporations and partnerships may not use the standard mileage rate method though, as this option is only available to individual taxpayers (either sole proprietors or employees using vehicles for work purposes). If you want to use the standard mileage rate method, which may very well be your best option especially with respect to the $5,000 vehicle because you won't have much to depreciate but may still put plenty of business miles on it, then you must retain title in your personal name and have the business reimburse you the standard mileage rate for business miles driven.

If you do not intend to use the standard mileage rate method, then you could put a vehicle in the name of your business and claim all the actual expenses for it. The business cannot deduct any of the vehicle expenses if it does not own the vehicle: it can only reimburse for mileage and deduct the reimbursement. The new car is a more likely candidate for deducting actual expenses because it may cost enough to the point where the actual deductions are more than that which could be deducted making mileage reimbursements.

Note that any personal use of a vehicle titled in the name of a business will result in income to the employee/owner, so be mindful of that fact too. If these vehicles are used 100% for business purposes it won't be an issue.

If a vehicle is owned by one of your businesses but (partially) used by the other one, you may also have some complications because the result is in effect shifting vehicle expenses from one business to another. If you plan to use a vehicle in more than one business, you may find it better to keep the vehicle in your personal name and take mileage reimbursements from whichever business you use the vehicle for.

I hope this is helpful.

Customer: replied 1 year ago.
thank you , but if i choice to register the car under the business, could i deduct the payment ( car Loan) of my business account as part of the car expenses. and if the case would be like 75% business use and 25% personal use.
Expert:  BK-CPA replied 1 year ago.

You may deduct interest on the car loan, but you cannot deduct the whole loan payment (a lot of people get confused on that). This is true regardless of whether you use the standard mileage rate or actual expenses and also whether a vehicle is titled in the name of an individual or a business, with one exception: employees cannot deduct interest on vehicle loans used for work (IRC 163(h)(2)(A)). The exception would be applicable in the case of your S-corp, meaning you could not deduct interest if getting reimbursed by the S-corp for mileage (because, I assume, you are an employee of the S-corp).

Customer: replied 1 year ago.
Sorry I haven't been very clear on my first question , but if I pay $5000 cash for the first car, can I deduct this amount as expenses? Thanks
Expert:  BK-CPA replied 12 months ago.

Hello and sorry for the delay in this response.

Yes, you generally may through IRC 179 despite IRC 280F, but then you cannot use the standard mileage rate for the vehicle ever again, so don't deduct the cost of the car in one year and then decide you want to use mileage in any future year. It's all or nothing.

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