Leasing a Vehicle as a Company - Process, Constraints & Personal Tax Implications

Hi everyoneđź‘‹

I’m considering leasing a vehicle under my company’s name for business purposes and was hoping to get some advice.

  1. What is the process for leasing a vehicle as a company (as opposed to an individual)?
  2. Are there any specific constraints or requirements I should be aware of?
  3. If I plan to use the vehicle for both business and personal use, does this need to be processed as an employee benefit or categorized differently?
  4. Do I have to report the personal use portion on my W-2 and be responsible for personal taxes on that part? How does that work when leasing under a company?
  5. Any tips for structuring the lease to maximize tax benefits?

Thanks in advance for your insights!

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  1. Same with lots more paperwork
  2. Does your company have credit history?
  3. You need to talk to an accountant
  4. You need to talk to an accountant
  5. You need to talk to an accountant.

My accountant is recommending that I just lease the car under my name, but have the LLC make the payments. Based on what % you use it for business, you then pay that percentage of the monthly lease note. For example, if you car is 80% business use, and the the note is $1,000/month, you can have the business pay $800/month and it would be a deductible business expense.

If you do per the above, then there’s no special W-2 reporting required.

There might be legal and liability reasons why you’d want to the car to be separate from you and owned/leased by your company, but if there’s only 1-2 cars in your household, I’m not sure what benefit there would be to lease it under the company itself.

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Same.

We also looked into insurance under the company name. It’s a lot more expensive as a commercial vehicle.

I would be interested in learning what your CPA would recommend too.

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This is what I do. Leased under personal name, paid for by the company.

It’s a common misconception that a vehicle has to be leased by the company to be written off, this is not true if you’re self employed. As long as it is actually for business use, all you need to do is pay for it from your business account and then write it off and keep appropriate logs/records.

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Agree with leasing as personal, but our business vehicle insurance is the same as personal.

You can pay from a personal account, but sure you need to keep all records.

True, don’t know why I said this, you don’t need to do that, like you said, just keep records, doesn’t matter.

Business insurance generally costs a lot more here.

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Same here. I asked my tax lawyer about this and he said that it doesn’t really matter on how it’s titled or which entity makes payments and insurance. However, you have to keep good records and have a car and income that fits your job. You can’t write off a Ferrari for a pizza parlor that’s never made a profit. However, a van/pickup truck for a large restaurant that’s making 1MM a year is ok! Or you can just do what a friend of mine did; write off a lambo as a Realtor and passed an IRS audit!

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Just pay the monthly note from your business account. (Why on earth wouldn’t you?) Don’t give the IRS any vector for attack. It just makes the records so much cleaner that way!

What vector if you are a sole proprietor? LLC? You move money from your business account to your personal account all the time.

Yeah, we’re saying the same thing. Just always pay for the car from the business account, not from the personal one. I can’t think of any advantages not to do this. What am I missing? And if the car is only 75% business use pay 75% from the business account, and 25% from your personal.

Nah, we are not saying the same thing. No advantages in paying from the business account, really. Just records keeping, maybe. Why overcomplicate? You pay from any account that’s convenient for you. Doesn’t matter which one.

I see, maybe if you are a sole proprietor there is no problem since you might be co-mingling all the time. But if I am an LLC or a C-Corp I don’t want to think about any support paperwork at all. I just want to file my taxes each year and cleanly deduct all my business expenses.

LLC can be the same. Consult your CPA :slightly_smiling_face: You need to have suppoting records in any case.

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Maybe I’ve had too much wine with dinner tonight, and want to argue for no good reason: but my dad was a tax auditor, and said they could always nail people with Sole Proprietorships with co-mingling. It’s just too easy to make a mistake and not have adequate documentation!! Don’t play on hard mode if you don’t have to!

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That’s why you pay your CPA.

Hey Tony, I think this wise guy is telling us how to run our business!

There used to be (might still be) a trash company in West LA which is a very upscale area. I used to see a Ferrari parked in front of it with a license plate TRSHMAN. That was back in the 1990s. Draw your own conclusions.

Your CPA won’t save your ass if you got nothing and mingle biz and personal. The onus for record keeping is on you unless your CPA is your full blown business manager. @darylp310 is mostly correct.

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Another option if you have an S corp is to set up an accountable plan and do monthly lease reimbursements thru it along with other items. The problem is that most CPAs don’t know how to do it right or just don’t know enough about it and dismiss it as useless. It’s actually a great tool.

And like most everyone said, lease in your name, keep good records and claim the business use within reason.

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