Can I rent a car from my own LLC business and write off expenses?

This is a tricky area that could potentially raise some red flags with the IRS. When you have an asset that's used for both business and personal purposes, the tax treatment gets complicated. If you purchase the car through your LLC and then rent it back to yourself, you'll need to establish an actual fair market rental rate and maintain meticulous documentation. The rental income would be taxable to your LLC, and you personally wouldn't be able to deduct the rental payments. The LLC could deduct legitimate business expenses related to the vehicle (depreciation, insurance, maintenance), but only for the portion of time the vehicle is actually used for business purposes by other customers. If you're the primary or only user, the IRS might view this as a scheme to convert nondeductible personal expenses into business deductions. A potentially better approach might be to track your actual business use of your personal vehicle and take the appropriate business mileage deduction on your Schedule C if you're a sole proprietor, or have your LLC reimburse you for the business portion of your vehicle use.

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I've been a tax preparer for 15 years, and I see this question A LOT with small business owners. Here's what often gets missed: there's a difference between "writing off vehicle expenses" vs the actual tax benefit you receive. Let's break it down - if you rent from your LLC, yes the LLC can deduct expenses, but you're also creating rental INCOME for the LLC. Meanwhile, your personal rental payments aren't deductible. So you're essentially moving money from one pocket to another while creating potential audit flags. Instead, consider taking the standard mileage rate (67 cents per mile for 2024) for business miles on your personal vehicle. Much cleaner documentation and less scrutiny from the IRS. Just keep a detailed mileage log.

Has anyone here used a lease instead of buying? My accountant suggested I have my business lease a vehicle, then the business could deduct the lease payments, and I would just pay personal use tax. Would this be cleaner than the rental arrangement?

One thing I haven't seen mentioned yet is the potential impact on your business insurance and liability exposure. When you own rental vehicles through your LLC but then become a regular user of one of those vehicles, you need to make sure your commercial auto policy covers this arrangement properly. I learned this the hard way when my insurance company questioned a claim because I was driving a "rental" vehicle that I technically owned through my business more than any actual rental customer. They wanted detailed records showing it was truly operating as a rental business vehicle vs. a personal vehicle owned by my business. Also consider the bookkeeping complexity - you'll need to track rental income from yourself, maintain separate accounting for that specific vehicle vs. your other rental fleet, and potentially deal with different depreciation schedules if the IRS determines it's not primarily a business asset. The lease approach others mentioned really does seem like the cleaner path here. You avoid the related-party transaction issues entirely while still getting legitimate business deductions.