Transcription
Listen, I want you to think about this for a second. If you're a business owner, a freelancer, or an entrepreneur just getting started, and you're still driving your personal car every single day to handle anything business related, and you want to know how to move that vehicle into your LLC, you are on the right video.
As a tax strategist at keepmos.com, I'm going to break down step by step exactly how to place your vehicle into your LLC. I'm going to show you the right way to do it in two simple steps. But more importantly, I'm going to keep you away from the lazy way. The way that gets you audited and worse, your insurance company denies your claims.
Let's start by clearing up a massive misconception. I hear it constantly, Karan. "I need the car in my business name to write off my car." No, you don't. That is a myth. The IRS allows you to take the standard mileage rate, actual expenses, section 179, and even 100% bonus depreciation on a personal vehicle as long as it's used for business. So, if the tax deduction is the same, why go through the hassle of transferring the title liability?
Think about it. If you get into a serious accident while driving to a client meeting, say you rear in a luxury SUV or, god forbid, someone gets hurt, the lawyers aren't just going to sue your business, they're going to look at the registration. And if that registration says John Doe and not Do Enterprises LLC, you failed to use the number one benefit of having an LLC before the lawsuit even starts. You are the legal owner of the asset that caused the damage. So remember, title in your name equals your personal house and assets are up for grabs. Title in the LLC's name equals the liability is contained to the assets of the business and not your personal assets.
So let's go through the steps of placing your vehicle in your LLC. Step number one is to transfer the title. Now, how you move the vehicle into the LLC depends entirely on how you own the vehicle right now. And there are three common scenarios: loan, lease, or already paid off.
If you have a loan on the car, here is what you should do. You see, most people in this case assume that they just need to go to the DMV and change the title to their business name, but they forget that the bank holds the title. And your loan agreement likely has a due on sale or alienation clause. So, if you transfer that title to your LLC without their permission, the bank has the right to demand the entire balance immediately. So, you have two good options here.
Option number one is to refinance. You go to the bank that offers commercial auto loans and you move the debt and the title at once. But warning, this is tough for new businesses with no credit history to do if you don't want to personally guarantee the loan.
Now, what if you don't own the car at all? What if you are currently in a personal lease from a dealership, right, from BMW or Ford? You can't just sign that over because the dealership owns the car, not you. So, in this scenario, you have to contact the leasing company and request a lease assumption. Here, you're essentially asking them to let your LLC take over the contract. Now, full transparency, the dealership is probably going to make you stay on as a personal guarantor. That's fine. The goal isn't necessarily to get your name off the hook with the bank. The goal is to get the LLC's name on that monthly statement. So once that lease is in the LLC's name, you pay the bill directly from your business bank account. That is how you create the bulletproof paper trail the IRS expects to see.
Now, if the car is paid off if you hold the title in your hand, this is easy. You are literally going to sell the car from you, the individual, to you, the LLC. So, here are the exact steps if the car is paid off already. First, you go to the DMV and sign the title over just like you were selling it to a stranger. But warning, depending on your state, you might have to pay sales tax. Again, some states have an exemption for capital contributions, but check first.
Next, you will create a bill of sale in the capital contribution. You cannot just hand over the keys. You need a paper trail. So create a simple bill of sale that says "I, John Doe, sell this 2024 Chevy Tahoe to Do Enterprises LLC." But you don't sell it for cash. You treat the value of the car as an investment. You write this specifically on the bill of sale: "Purchase price $0. Consideration: capital contribution of fair market value." And then you list that fair market value. This establishes the basis of the vehicle in the company for things like depreciation. So file this in your business binder.
Now step two to moving the vehicle in your LLC is to get the right insurance. So imagine this. You successfully transfer the title. You've got the LLC name on the registration. Then you have a car wreck. You hand the police your personal insurance card, but the car is registered to Smith Consulting LLC. Well, the insurance adjuster is going to look at that mismatch there and deny your claim. Why? Because they priced your policy for a civilian driving to the grocery store, but you exposed them to commercial risk. In their eyes, that is a breach of contract. You could be on the hook for damages with zero coverage.
So, to solve this before it becomes an issue, you should switch to a commercial auto policy. Yes, it cost 20 to 30% more, but that premium is also 100% business deduction. You are buying a bigger shield with pre-tax dollars.
So, once you move that vehicle into the LLC, you may now be wondering about vehicle write-offs and what your options are. Well, there are two primary methods for writing off a vehicle. The standard mileage rate and the actual expense method. You can actually find a comparison of both methods inside keepost.com, the platform that helps you discover over 90 deductions and credits to help you save on taxes.
Now, the standard mileage rate is the most common approach because of its simplicity and accessibility. Here, you track every mile driven for business purposes using an automated tool like Mile IQ. The IRS sets a specific cent rate each year to cover gas, insurance, and wear and tear. And for 2026, the rate is 72 1.5 cents per mile. So if you drive 30,000 business miles, your deduction is $21,750,000. So if you're an app-based driver, a traveling sales representative, or a consultant, even constantly on the road, the mileage deduction often exceeds the actual out-of-pocket cost of operating the vehicle. It's a volume play where the more you drive, the larger your tax shield becomes.
Now, the second way to write off your vehicle is called the actual method, and it lets you deduct the specific cost of operating the vehicle based on your business usage. So, this requires more diligent recordkeeping, but can lead to significantly higher deductions depending on the vehicle type and how it's financed. So, here's what's deductible with the actual expense method: gas, oil and tires, repairs and maintenance, insurance and registration fees, lease payments or depreciation. You see, if you're using the vehicle for both personal and business use, you must determine the business use percentage. For example, if you use the car for business 80% of the time, you can deduct 80% of your actual expenses.
Now, notice I also mentioned depreciation as a potential write-off under the actual expense method. When using the actual expense method, you can potentially write off up to 100% of the vehicle's purchase price in a single year using section 179 or bonus depreciation, which is back to 100% for 2026. And this applies primarily to vehicles with the gross vehicle weight rating over 6,000 pounds, allowing you to bypass the standard luxury auto depreciation caps. So, this is why many entrepreneurs buy G Wagons, Model X's, and big trucks. But please note the difference between an expense and a liability. If you have a car loan, you cannot deduct the full monthly payments because the principal portion is considered a liability. However, if you lease the vehicle, the lease payments is an expense that can be deducted. This method is generally preferred for business owners who do not drive long distances but operate high value vehicles or heavy SUVs.
To decide which path to take, you must analyze your business model. If you have a long commute or travel between multiple job sites daily, the standard mileage rate is likely your best move. If you primarily work from a fixed location but have a high vehicle overhead or a business lease, the actual expense method is usually the more logical choice. But regardless of the method, the IRS requires you to have a log or record created at the time of the activity with the goal to treat your vehicle as a strategic business tool rather than a personal drain. So by selecting the method that best aligns with your specific driving habits, you ensure you keep the maximum amount of profit within your business.
So hopefully this video helped you. If you enjoyed it, go ahead and give it a like and make sure you subscribe to the channel for more information that helps you save on taxes and increase your wealth. And take a look at kmos.com if you're looking for tax deductions, tax credits, and CPA level strategy to help you save on taxes as well. My name is Kuran and I'll see you in the next video. Take care.