Can I lease my vehicle to my LLC?

Yes, you can lease your personal vehicle to your LLC, but you have to be mindful of some things. To keep things legit and tax-compliant, you’ll need a written lease agreement outlining the monthly lease, usage limits, operating expenses, and who’s responsible for insurance, registration fees, and maintenance.  

How Leasing a Car to Your Business Works?  

When you lease your personal vehicle to your business, you’re essentially treating yourself as a leasing company. Your LLC gets access to the car for business purposes, and you receive lease payments in return.   

This approach is especially helpful for small business owners or freelancers who regularly use their vehicles to meet clients, deliver products, or travel for work.  

How to Lease a Personal Vehicle to Your LLC?  

Here’s a simple rundown of how to set it up properly:  

Evaluate the Vehicle’s Use Case  

Make sure the car is used for business miles only. If your bakery van delivers cakes five days a week, you’re good to go.   

On the other hand, if you use it for personal errands, it can’t be considered a business expense.   

Track Your Mileage  

Accurate mileage logs are critical. Whether you’re calculating standard mileage or actual expenses, the IRS wants evidence if you’re claiming a mileage deduction or other tax deductions.  

Choose the Right Lease Type  

Whether you’re structuring the lease yourself or going through a formal leasing company, pick a lease that allows for business leases and doesn’t penalize high mileage. Remember, the mileage rate can increase when you drive often for work.  

Consult a Tax Professional  

Before locking in the lease, talk to a CPA. There are real tax advantages here, including deductions for lease payments, gas, maintenance, and even some depreciation depending on how you structure the lease and report income tax.  

Separate Business and Personal Use  

Keep your business expense records separate. If your car also gets used for school drop-offs or grocery runs, don’t mix those costs with business ones.  

Why Not Just Elect S Corp Status Instead?  

Leasing a vehicle to your LLC can help reduce self-employment taxes, especially if your business income isn’t high enough to switch to an S Corp (which makes $40,000 to $60,000 in annual net income). This setup keeps things lean, simple, and tax-efficient for many LLCs.  

Short on time? Watch a quick explainer video instead 👇

Benefits of Leasing Your Vehicle to Your Business  

Tax Deduction Opportunities: Leasing allows you to deduct lease payments, insurance, and maintenance and turn everyday costs into business write-offs.  

Cash Flow Relief: Leasing a car typically has a lower upfront cost than buying a vehicle or taking on a car loan. This frees up capital for other business needs.  

Built-In Flexibility: Leasing allows you to upgrade every few years without worrying about selling an outdated vehicle.  

Simplified Reporting: This structure simplifies recordkeeping for year-end tax filings, especially when paired with tools that log business miles.  

Example  

Let’s say you own a van, but your catering business uses it full-time. Instead of letting it slide, you draft a lease agreement between you and your business.   

That way, your business can write off lease payments and fuel as business expenses while you collect the income and handle the car’s operating expenses.