Can I rent my personal car back from my own LLC for tax deductions?

Thanks for the detailed response. What if I rented my vehicles to actual customers too, not just myself? Like maybe 70% external customers and 30% personal use? Would that help establish it as a legitimate business?

That would definitely strengthen your case. Having a significant portion of your rentals go to unrelated third parties helps establish a genuine business purpose. Aim for at least 50% of your rental activity to be with unrelated customers to be safer. You'll also want to maintain separate insurance (commercial) for the vehicles, have formal rental agreements for all customers (including yourself), and ensure all transactions between you personally and your LLC are documented and at market rates. Keep meticulous records of all business activities, marketing efforts, and a business plan showing your profit motive.

How long did the analysis take? I've got a similar situation with some construction equipment I'm thinking about putting in an LLC.

Sounds interesting but I'm skeptical. Does it actually have real tax professionals review your specific situation or is it just some algorithm making generalizations?

The initial analysis took about 20 minutes after I uploaded my documents. They have both an AI system and actual tax professionals who review complex cases. For your construction equipment question, they specifically mentioned equipment rental companies require different documentation than vehicle rentals. They provided templates for proper rental agreements and explained how to set appropriate rental rates that wouldn't trigger IRS scrutiny.

How does this even work? The IRS never answers their phones - I've tried calling dozens of times about a notice I got.

Yeah right. Nobody gets through to the IRS that fast. Their hold times are legendary. This sounds like a scam to me.

It's a priority line service that works with the IRS callback system. They basically secure your place in line and then the IRS calls you back. The reason it works is that they have dedicated resources constantly calling and navigating the IRS phone system. When I used it, I got a callback from an actual IRS agent the next morning who had my case details in front of them. Saved me probably 20+ hours of hold time and frustration.

I hadn't even thought about the sales tax aspect! Is that true even if it's just occasional rentals rather than a full-time rental business?

Yes, unfortunately sales tax obligations typically kick in from the first dollar of rental revenue. Many states don't have minimum thresholds for car rentals like they might for other businesses. Some states even have special car rental excise taxes on top of regular sales tax. It's also worth noting that these taxes would apply to the fair market value of the rental, even if you gave yourself a "discount." The tax authorities want their cut based on what the rental should have cost, not what you decided to charge yourself.

Exactly this! I work in insurance and we decline coverage all the time when we discover people are using personal vehicles for rental businesses. If there's an accident while the car is being "rented" in this arrangement, you'd likely have no coverage at all.

This is really helpful insight from someone who's been through audits. The point about needing majority rentals to unrelated parties is crucial - I was initially thinking I could just rent to myself and my family, but it sounds like that would be a dead giveaway to the IRS. Do you have any sense of what percentage of third-party rentals would be considered "safe"? Also, when you mention compliance costs, are you talking about things like the commercial insurance and sales tax registration, or are there other ongoing requirements I should know about? I'm starting to think this might be more trouble than it's worth, especially if the audit risk is high even when done correctly.

Based on my experience with IRS audits, I'd recommend at least 60-70% third-party rentals to be on safer ground, though there's no magic number that guarantees you won't be scrutinized. The higher the percentage of unrelated party rentals, the stronger your position. Regarding compliance costs, you're looking at commercial insurance (which can be $3000-5000+ annually for even a small fleet), sales tax registration and filing requirements in your state, potential rental car excise taxes, business licensing, and the administrative burden of maintaining separate books and records. You'll also likely need an accountant familiar with rental businesses to ensure proper tax treatment. Most people underestimate these ongoing costs and find that the actual tax savings are much smaller than expected once you factor in the legitimate business expenses and compliance requirements. Unless you're genuinely interested in running a rental car business as a profit-generating venture, the juice usually isn't worth the squeeze from a pure tax optimization standpoint.

This is a really important point about the mileage deduction issue that I hadn't considered. So essentially, if the LLC owns the car and I'm paying rental fees, I can't also claim business mileage as an individual taxpayer - it would have to be one or the other? The title transfer triggering sales tax is another cost I didn't factor in. Between that, the commercial insurance, potential sales tax registration, and all the administrative overhead everyone's mentioned, it's starting to look like the actual tax benefits would be pretty minimal after accounting for all the legitimate costs of running this as a real business. Thanks for bringing up the creditor liability aspect too - I hadn't thought about how putting personal vehicles into an LLC might expose them to business creditors if something went wrong. That's definitely a risk I need to weigh carefully.

Exactly right on the mileage deduction issue - it's an either/or situation, not both. If the LLC owns the vehicle and you're paying rental fees, then the LLC gets to claim all the vehicle-related deductions (depreciation, maintenance, insurance, etc.) while you pay market-rate rental fees. You can't then turn around and also claim business mileage deductions on your personal return for using that same vehicle. The title transfer sales tax can be substantial depending on your state - some charge the full rate on the vehicle's current value, which could easily be thousands of dollars. And yes, once the vehicles are LLC assets, they become part of the business's balance sheet and could potentially be reached by business creditors. Given all these factors - the commercial insurance costs, sales tax implications, administrative burden, audit risk, and the need for genuine third-party rental activity - most people find that a simple mileage log for legitimate business use ends up being far more cost-effective than trying to create a rental arrangement with their own LLC. The complexity and costs usually outweigh the potential tax benefits unless you're genuinely building a rental car business.