Can a Stay at Home Mom Create a Taxi Service Business LLC for Tax Purposes?

I'm a tax preparer, and I need to caution you about this idea. While it sounds creative, there are several issues with this plan from a tax perspective. First, the IRS requires a business to have a genuine profit motive. If you're only driving your own children around, that's considered a personal activity, not a business. You need actual paying customers (other people's children) and a legitimate expectation of making a profit. Second, even if you did create a transportation service for other children, you'd need proper licensing, commercial insurance, and potentially special driver certifications depending on your state laws. These costs would likely exceed any tax benefits. Third, paying yourself as an expense doesn't work the way you might think. Business owners can take draws or distributions from their business, but these aren't deductible expenses for the business.

I tried figuring out all sorts of deductions last year and ended up using this AI tool called taxr.ai (https://taxr.ai) that helped me understand what business expenses were actually legitimate. It analyzed all my receipts and mileage logs and told me what would qualify and what wouldn't. For something like this mom taxi idea, it actually gave me a detailed breakdown of the legal requirements and explained exactly what would make it a legitimate business vs. a personal activity. It saved me from making some pretty questionable deduction claims that might have triggered an audit.

Ok I have to admit I was totally wrong about taxr.ai! I tried it after my skeptical comment and it actually caught some major issues with how I was classifying some of my "business" activities. It walked me through the whole "profit motive" test the IRS uses and showed me exactly where my home business would fail an audit. Saved me from some really questionable deductions I was planning to take. Definitely worth checking out if you're considering any kind of business setup like this mom taxi idea.

If you're planning to call the IRS to ask about this kind of business setup, good luck getting through! I spent DAYS trying to reach someone about my LLC tax questions last month. Finally used Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with was super helpful about explaining what qualifies as a legitimate business expense vs. personal activity. Basically confirmed what others are saying - driving your own kids doesn't qualify as a business, but creating an actual service for others might, with all the proper licensing and insurance.

I take back what I said about Claimyr. I was convinced it was a scam but got desperate last week trying to resolve an IRS notice about my self-employment taxes. After wasting an entire afternoon on hold, I gave it a shot. The service actually called me back in about 40 minutes with an IRS agent on the line. The agent answered all my questions about business classifications and deductions. Turns out I've been doing some things wrong with my side business for years. Not cheap but saved me from potentially thousands in audit penalties.

Instead of trying to create a questionable tax setup, have you considered tracking your mileage for legitimate tax deductions? If you volunteer for a nonprofit (like your kids' school or sports organization), those miles can sometimes be deductible as charitable contributions (around 14 cents per mile). Or if you have any actual self-employment income, business-related driving can be deducted at the standard mileage rate (65.5 cents per mile for 2025).

Has anyone looked into the rideshare idea but for kids? There are legitimate companies like HopSkipDrive and Zum that specialize in kid transportation. Maybe instead of creating your own LLC, you could become a driver for one of these established services? They handle all the regulatory compliance, insurance, and payment processing.

I understand the appeal of trying to monetize all that driving time, but I have to echo what others have said - the IRS is pretty strict about legitimate business activities vs. personal expenses. One thing I haven't seen mentioned yet is the potential audit risk. The IRS has gotten much better at flagging businesses that look like they're just trying to convert personal activities into tax deductions. If you're deducting thousands in mileage but only have your own kids as "customers," that's going to raise red flags immediately. If you're really interested in this space, I'd suggest starting small with the legitimate rideshare services for kids that others mentioned. Build up some actual income history, understand the real costs (insurance, wear and tear, gas, time), and then maybe consider whether expanding into your own service makes financial sense. Also, don't forget that even legitimate business income means you'll be paying self-employment tax (about 15.3% on top of regular income tax), so the tax benefits might not be as attractive as they initially seem.

I'm glad to see people are steering you toward legitimate options! As someone who's dealt with IRS audits professionally, I want to emphasize how serious the "profit motive" test is. The IRS has specific factors they look at: whether you operate in a businesslike manner, maintain complete records, have expertise in the activity, expect to make a profit, and actually do make a profit in some years. Simply creating an LLC and paying yourself for driving your own kids fails almost all of these tests. You'd have no external customers, no market-rate pricing, and no realistic path to profit - it's essentially a paper transaction designed solely for tax benefits, which is exactly what triggers audits. The charitable mileage deduction mentioned earlier is a much safer approach if you're already volunteering. And if you want to explore the kid transportation business seriously, starting with an established platform like HopSkipDrive gives you legitimate income to build from. Just remember that even with real business income, you'll need to track everything meticulously - the IRS expects the same level of record-keeping whether you make $500 or $50,000.