Has anyone ever purchased a company vehicle for a business they started?

I started an LLC recently for a construction company and from what I understand I can purchase a vehicle and not pay taxes on the income I used to purchase the vehicle. Is this correct?

How does it all work?

Sec 179 deduction

Sims said:

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Sec 179 deduction

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This. You get a deduction on your tax return for the vehicle. If it's over a certain weight (maybe 6000 lbs), you can write it all off in one year. If not, you have to depreciate it.

i have heard of people making LLCs in Montana and buying an expensive car inside the LLC to avoid sales taxes... seems a bit like tax evasion to me

What gigemhilo said. Often, at least for a few years, bonus depreciation was generally better than Section 179, since the latter is subject to trade or business income limitations, whereas bonus depreciation is not. Section 179 cannot create a business loss, bonus depreciation can. But, as I recall, bonus depreciation is limited to 80% of the cost in 2023, which might come into play.

Section 179 can be an asset-by-asset election whereas bonus depreciation requires all assets in the same class to be written off, can't just do one.

Beware of the 6,000 pound GVW rule as someone mentioned. The personal use situation needs to be considered, quite a few don't really do that correctly. It is a lay-down hand for the IRS in many situations if there is an audit. And, as gigemhilo mentioned, you probably need to visit with a tax professional about something like this.

Would a lease be better in this situation?

You didn't ask about this but also consider your personal liability. If someone were to sue your LLC and that attorney could prove you were driving the truck for personal use you have just mixed assets. I personally wouldn't do it unless it was 100% used for the LLC.

Stive said:

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Would a lease be better in this situation?

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You would have to run the numbers. The personal use situation would still apply and there is a calculation you won't want to do (called the inclusion amount) with regard to the allowable deduction. Plus, since you don't own the vehicle, you don't get the full deduction (subject to the business use portion) like you do with one you purchase.

mrmill3218 said:

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Has anyone ever purchased a company vehicle for a business they started?

I started an LLC recently for a construction company and from what I understand I can purchase a vehicle and not pay taxes on the income I used to purchase the vehicle. Is this correct?

How does it all work?

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Get a CPA.

As long as you have an extra car to call your 'personal use vehicle' you can do if t without worrying about splitting time between personal and business.

Comeby! said:

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As long as you have an extra car to call your 'personal use vehicle' you can do if t without worrying about splitting time between personal and business.

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Citation? The IRS does not agree with you.

If what you said was the case, you could buy a $500 beater as a 'personal use vehicle' then fully write off a $100,000 vehicle even if you only used it 50% for business. But you can't.

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100% business use and 100% personal use. YMMV. Get a good tax group.

Comeby! said:

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100% business use and 100% personal use. YMMV. Get a good tax group.

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Citation for your earlier post?

You might also want to consider that insurance as a business for the vehicle will likely be considerably higher than if owned as a personal car. Also, the business will have to qualify for the loan (may not be an issue for you)