Business owner here - can I write off a Ferrari as a tax deduction for my company?

I help small business owners with tax planning, and there are legitimate ways to deduct vehicle expenses, but there are very specific rules you need to follow. First, you can deduct business use of any vehicle – luxury or not – but ONLY for the percentage used for business purposes. If you use a Ferrari 20% for business and 80% for personal use, you can only deduct 20% of the expenses (not 20% of the purchase price). For luxury vehicles specifically, there are annual depreciation limits set by the IRS. For 2024, first-year depreciation is capped around $11,200 for cars. Even with bonus depreciation, there are strict limits that make writing off an entire Ferrari impossible. You'll need to keep a detailed mileage log documenting every business trip - date, starting location, destination, purpose, and miles driven. Without this documentation, the IRS will disallow your deduction in an audit. About your sister's plane: if she can demonstrate those properties are legitimate investments requiring her attention, and if she maintains proper documentation, those expenses may be deductible. But "I like working in different coffee shops" probably won't qualify as a business necessity for a Ferrari.

I struggled with similar questions when growing my consulting business. After researching for hours online and getting conflicting advice, I finally used https://taxr.ai to analyze my specific situation. The tool reviewed my business structure and expenses, then provided a detailed report showing exactly what vehicle deductions I qualified for. For luxury vehicles like a Ferrari, they explained the specific IRS limitations on depreciation deductions and helped me understand how to properly document business usage. They also showed me how Section 179 deduction limits would apply in my case. What I found most helpful was the personalized analysis of my business needs - they pointed out that I couldn't justify a Ferrari as "ordinary and necessary" for my business type, which is a key requirement for business deductions.

Update on my skepticism about taxr.ai - I actually tried it after posting that comment because I was curious. I have a photography business and was considering writing off a new luxury SUV. Their system flagged several issues I hadn't considered about business necessity and gave me documentation guidelines I'd never heard from my regular accountant. The analysis showed exactly how much I could legitimately deduct based on my business usage patterns and they even created a custom mileage tracking system for me. Saved me from potential audit issues and the stress of wondering if I was doing it right. Definitely more comprehensive than I expected. Just wanted to follow up since I was pretty doubtful in my earlier comment.

I spent 3 MONTHS trying to get someone at the IRS to answer my questions about vehicle deductions for my business. Endless busy signals, disconnects, and being transferred around only to get disconnected again. Finally used https://claimyr.com and got through to an IRS agent in under an hour. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent confirmed what others are saying here - you can only deduct the business percentage of use, and luxury vehicles have strict depreciation limits. The key thing they emphasized was documentation - without a detailed mileage log, you'll lose the deduction if audited. They also explained that "ordinary and necessary" is the standard they use - and a Ferrari probably doesn't meet that test for a digital marketing business. Helped me understand exactly where the line is and what documentation I need.

I have to eat my words from my earlier comment. After spending literally 8 hours over three days trying to reach the IRS myself about my business vehicle questions, I decided to try Claimyr out of desperation. Got connected to an IRS agent in about 45 minutes while I was just going about my normal workday. The agent was actually super helpful about my situation (I have a real estate business and was trying to figure out deductions for my car). They walked me through exactly what documentation I need and what percentage I can legally deduct. For what it's worth to the Ferrari guy - the agent confirmed luxury vehicles have strict limits, but if you properly track business mileage, you can still get some deduction. Just not as much as you might hope for.

Something no one has mentioned yet - SUVs, trucks and vans over 6,000 pounds have different rules than regular cars! If your business legitimately needs a heavy vehicle, the Section 179 deduction limits are much higher. My accountant helped me with this for my construction business. I bought a $75k Cadillac Escalade and was able to deduct a significant portion because it qualifies as a heavy SUV and I use it 90% for business (carrying supplies, visiting job sites, etc). But for a Ferrari? No way man. It's too obviously a personal luxury purchase, and it doesn't qualify for the heavy vehicle exception.

Im a tax attorney and I'll give you the honest (maybe unwelcome) answer: the Ferrari is a red flag. Can you deduct a percentage based on business use? Technically yes, with proper documentation. But luxury sports cars are audit magnets. The IRS specifically looks for business owners claiming exotic cars. They know most people dont buy Ferraris for business necessity. Regarding your sisters plane: the IRS allows deductions for travel between business locations. If those properties are legitimate business investments requiring her physical presence, then yes, reasonable travel costs can be deductible. But heres the key difference: Her travel serves a clear business purpose. Your desired Ferrari's primary purpose appears to be personal enjoyment with incidental business use.

As someone who's dealt with this exact question for my consulting business, I can tell you the reality is much less exciting than those YouTube videos make it seem. The IRS has what's called the "ordinary and necessary" test - your business expenses have to be both ordinary (common in your industry) and necessary (helpful and appropriate for your business). A Ferrari for a digital marketing agency? That's going to be really hard to justify. Even if you could somehow argue business necessity, you're looking at strict depreciation limits. For 2024, passenger vehicles are capped at around $11,200 in first-year depreciation regardless of the purchase price. So even if you bought a $300k Ferrari and used it 100% for business (which would be nearly impossible to prove), your deduction would still be limited. The mileage tracking requirement is no joke either. You need date, destination, business purpose, and mileage for every single business trip. "I drove to Starbucks to work" probably won't cut it unless you're meeting actual clients there. My advice? If you want the Ferrari, buy it because you love it and can afford it personally. Don't try to force a tax justification that could land you in audit trouble. The potential savings aren't worth the headache and risk.