Car Deduction under LLC

wrote

It doesn't matter if it's new or used, when you buy it, it's "new" to the business. Now, you can't deduct teh purchase price of the vehicle as an expense, it gets depreciated (expensed) over a number of years.

The mileage rate for 2007 was just released, and baring any huricane in the gulf, it's going to be 48.5 cents per business mile. Your other option would be to deduct actual expenses and depreciation. If you don't use that vehicle 100% for business purposes, you will have to prorate the expenses.

A mileage log works best. You can get them for a few bucks at Office Depot or the like.

Insurance is generally higher for a business owned vehicle. There may be higher fees set by the state/county/city for business licensing and permits, etc.

Yup. You wouldn't reimburse the business, you would only take the deductions based on a percentage of business miles against total miles. The rest are non-deductible, and raise your taxable income.

Home office deductions for rental property are a hard sell in an audit. The rules for a home office are a defined space that is used ~regularly~ and ~exclusively~. While you can easily carve out something that looks like an office and use it exclusively as an office, the "regularly" part is questionable for rental activities that, what, maybe requires opening a few envelopes with checks, and paying a half dozen bills a month. How many rental properties you have, and the actual amount of time you will put toward this activity will determine if you can claim a home office.

The lexus sedan, camery or mini-van will fall under the regular vehicle rules for depreciation, and if you broach the "luxury" limits (a whopping $14,800) your depreciation gets limited.

Yup. There isn't any huge need for an office if someone else does the work, and the amount of travel would be much less if you weren't "active" in the business. You also run the risk of not being able to deduct losses (because you are passive) in the rental activity. Consult a local CPA or EA about your options on the vehicle and home office as well as what and when you record income and what are the deductible expenses for rental activities.

-- Paul Thomas, CPA snipped-for-privacy@bellsouth.net

I had thought a home office deduction was in connection with the active conduct of your trade or business? Would that mean it does not apply to a passive activity such as managing rental property? __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Both prior responses offer good information about the questions the OP asked. I have a question for the OP. How is the property going to get into the LLC? It's often difficult to get a mortgage lender to lend to an LLC, even if you, the member, offer to cosign the loan. If you purchase yourself subject to a mortgage and quit claim it into the LLC, then you're going to be in violation of your mortgage loan contract. If you own the property outright not subject to a mortgage then this doesn't apply.

Paul, Thanks a lot for the insightful information! I really appreciate it. Would you mind helping me with a few clarifications?

Only to the extent you pay yourself for it, and you have to report that income. So no, you can't.

Whoever gets the money pays income tax on it.

Seth