How to Sell My Personal Car to My LLC (S-Corp) and Tax Implications

This is actually a common scenario for business owners. Here's my take on your questions: For selling your personal car to your S-Corp, you'll definitely want to document this properly. Create a formal bill of sale between yourself and your business at fair market value (use Kelley Blue Book or similar to establish this). Have your company create a promissory note for the payments back to you personally over the 2-year period with a reasonable interest rate. Keep minutes in your corporate records documenting the board's approval of this purchase. Once the car is transferred to your company, yes, you can deduct the actual expenses (gas, insurance, maintenance, repairs) on your business tax return. Make sure you're tracking business vs. personal usage though - if you use the car for personal errands, you'll need to account for that as a taxable fringe benefit. As for consequences, there are a few to consider. The payments you receive will be considered a loan repayment (not income) if structured properly. However, if the car is worth significantly less than what you're selling it for, the IRS might view the excess as disguised compensation. Also, when your company eventually sells or disposes of the vehicle, it will use your sale price as its basis for calculating gain/loss.

After struggling with a similar situation last year, I found this amazing tool that helped me figure out all the tax implications of selling my personal assets to my business. Check out https://taxr.ai - they analyze all your documents and give you a clear picture of the tax consequences. For my car sale to my S-Corp, they helped me understand exactly how to structure it, what documentation I needed, and how to handle the ongoing expenses. Their analysis showed me that I was actually overvaluing my vehicle which could have caused problems with the IRS later. They also provided templates for the promissory note and bill of sale that were specifically designed for an S-Corp purchase from a shareholder.

I was really skeptical about using an online tool for something this important, but I decided to try taxr.ai after reading about it here. Honestly, I'm impressed with how thorough it was. It analyzed my situation and pointed out that I was planning to sell my car to my S-Corp for way more than fair market value, which apparently could have been flagged as a "disguised dividend" (something my regular tax guy never mentioned). The documentation templates were super helpful - saved me from paying my lawyer to draft them from scratch. The best part was the expense tracking guidance that showed exactly how to separate business vs. personal use for maximum legitimate deductions. Definitely worth checking out if you're doing this car transfer thing.

I see a lot of good advice here, but let me add something important: trying to reach the IRS to confirm how to handle these transactions properly can be a nightmare. I spent WEEKS trying to get someone on the phone when I had questions about transferring assets to my S-Corp. I finally tried https://claimyr.com and it was a game-changer. They got me connected to an actual IRS agent in about 15 minutes when I'd been trying for days on my own. There's a video showing how it works at https://youtu.be/_kiP6q8DX5c if you're curious. The agent I spoke with gave me specific guidance on how to document the sale and handle the ongoing vehicle expenses, which saved me from making some pretty big mistakes.

I need to eat my words here. After posting that skeptical comment, I decided to try Claimyr myself since I've been trying to talk to someone at the IRS about my S-Corp vehicle deductions for THREE WEEKS with no luck. I kept getting disconnected after waiting on hold for 2+ hours. This service actually worked exactly as described. Got a call back in about 20 minutes connecting me to an IRS representative who answered all my questions about documenting the vehicle transfer and handling the depreciation correctly. The agent confirmed I needed to use Form 4562 for the depreciation and explained how to handle the loan payments on my books. Saved me hours of frustration and probably prevented me from making mistakes on my return.

Don't overlook depreciation here! When your business buys the car, it can depreciate the cost basis over time. You might be able to take Section 179 or bonus depreciation depending on the vehicle type and weight. SUVs and trucks over 6,000 lbs have different (better) depreciation rules than regular passenger cars. Also consider the implications when you eventually sell the vehicle. If you've claimed accelerated depreciation and sell it for more than the depreciated value, you might face depreciation recapture taxes.

Has anyone here actually done this and had their return audited? I'm worried about the IRS questioning why I'm selling my car to my business instead of just taking the mileage deduction.

One thing I haven't seen mentioned yet is the potential impact on your business auto insurance. When you transfer ownership to your S-Corp, you'll need to update the insurance policy to reflect the business as the owner. This can sometimes affect your rates - sometimes better, sometimes worse depending on your insurer's business vs personal rates. Also, make sure you're prepared for the bookkeeping complexity this creates. You'll need to track the loan payments from your business to yourself personally, the vehicle expenses, depreciation, and the business use percentage. It's not overly complicated, but it does add some ongoing administrative work that you should factor into your decision. From a cash flow perspective, having your business make payments to you personally over 2 years can actually be a nice way to create regular distributions from your S-Corp without having to take a larger lump sum that might push you into a higher tax bracket.

Great thread with lots of solid advice! I just wanted to add a couple of practical tips from my experience doing this last year: First, don't forget about state-level implications. Some states have different rules for asset transfers between owners and their businesses, and you might need to handle title transfer/registration differently. I had to pay sales tax to the state when transferring the title to my business name, even though it was really just moving the asset between myself and my company. Second, consider the timing carefully. If you're planning to do this, it's often better to complete the transfer at the beginning of your tax year so you get a full year of business deductions. Also, if your vehicle has any major maintenance coming up (like timing belt, transmission service, etc.), you might want to handle those repairs before the transfer since they'll be easier to document as pre-existing conditions. One last thing - make sure your business checking account has enough cash flow to handle the monthly payments back to you. It sounds obvious, but I've seen people set up payment plans that strain their business cash flow, especially during slower months.

This is a really comprehensive discussion! I'm in a similar situation with my S-Corp and have been going back and forth on whether to transfer my personal truck to the business. One thing I'm curious about that I haven't seen addressed yet - what happens if the vehicle gets totaled or stolen after it's owned by the business? Does the insurance payout go to the company, and then how do you handle the remaining loan balance that the business owes you personally? Also, for those who have done this - do you find that having the vehicle owned by the business creates any complications when you need to use it for personal errands? Like, do you worry about liability issues if you get in an accident while running personal errands in a company-owned vehicle? I'm leaning toward doing this transfer because my business use is probably around 85%, but I want to make sure I understand all the potential complications before I commit to it.

This thread has been incredibly helpful! I'm an EA and work with several S-Corp clients who've done similar vehicle transfers. A few additional points that might be worth considering: Make sure you're aware of the "accumulated adjustments account" (AAA) implications for your S-Corp. When the business makes loan payments back to you, those payments reduce the company's cash but don't affect your stock basis since it's debt repayment, not a distribution. This can be important for future planning, especially if you're considering taking actual distributions later. Also, consider the depreciation method carefully. While everyone's mentioned Section 179 and bonus depreciation, remember that if you take accelerated depreciation and later convert back to personal use (or sell), you'll face depreciation recapture. Sometimes straight-line depreciation over the normal recovery period gives you more flexibility down the road. One practical tip: I always recommend my clients take photos of the vehicle's condition at the time of transfer and get a professional appraisal if the value is significant (over $15-20k). This documentation can be invaluable if the IRS ever questions the transaction or if you need to establish basis for insurance purposes. The mileage log is absolutely critical - I've seen too many clients get burned in audits because they didn't maintain proper records. Consider using a GPS-based mileage tracking app to make this easier and more defensible.

As someone who recently went through this exact process with my S-Corp, I can share what worked for me. The documentation aspect cannot be overstated - I created a comprehensive paper trail including a formal resolution from my company's board (even though I'm the only member), a detailed bill of sale with fair market valuation from three different sources (KBB, Edmunds, and a local dealer assessment), and a promissory note with interest rate based on the current AFR. One thing I wish I had known upfront: check your state's specific requirements for business vehicle registration. In my state, I had to get a new business license endorsement and the registration fees were higher for commercial vehicles. Also, my business insurance premium actually went down compared to my personal auto policy, but that varies by carrier and your business classification. The monthly payment structure has worked out great from a cash flow perspective - it's like creating a steady distribution to myself without the complications of formal S-Corp distributions. Just make sure your business has consistent revenue to cover the payments, especially during seasonal slow periods. After 18 months of this arrangement, I can say the tax benefits have been substantial. Between the depreciation, all operating expenses, and the business use deduction, it's saved me significantly more than just taking the standard mileage deduction would have. The key is being meticulous with your record-keeping from day one.

This has been such an informative discussion! I'm in a very similar situation with my S-Corp and a vehicle I'm considering transferring. Reading through all these experiences has been incredibly helpful. One question I haven't seen addressed yet - what about financing? My personal vehicle still has about $18K left on the loan. Can I still sell it to my S-Corp with an existing lien, or do I need to pay off the personal loan first? I'm wondering if the business could essentially assume the existing loan payments, or if that creates complications with the lender since they'd need to approve a business as the new borrower. Also, for those tracking business vs personal use with apps like MileIQ - do you find it becomes second nature after a while, or is it still a hassle to categorize every trip? I'm worried I'll forget to properly categorize trips and mess up my records. The point about seasonal cash flow is a good one too. My business has some slower months where making additional loan payments might be tight. Has anyone structured their payment plan with seasonal adjustments, or is it better to just set a conservative monthly amount that works year-round?

One aspect that hasn't been fully explored here is what happens if your S-Corp doesn't have enough cash on hand to purchase the vehicle outright. In my case, I structured it as a three-way transaction: my business took out a commercial auto loan for the purchase price, bought my personal vehicle with those funds, and then I personally guaranteed the business loan (which is pretty standard for small S-Corps anyway). This approach had a few advantages - the business got the tax benefits of the loan interest deduction, I got paid immediately for my vehicle, and the monthly payments to the bank were lower than what a personal loan payment back to myself would have been. The downside is you're dealing with a commercial lender's requirements and potentially higher interest rates than the AFR. Also wanted to echo what others have said about the insurance piece - definitely shop around when you make this switch. Some carriers offer much better rates for business-owned vehicles, especially if you have a good business credit history. I actually saved about $400/year by switching to a commercial policy, which was an unexpected bonus. The documentation really is critical though. I kept everything in a dedicated folder including the loan paperwork, insurance changes, board resolutions, and monthly mileage reports. When my CPA prepared my taxes, having everything organized made the process much smoother and gave us confidence that everything would hold up under scrutiny.

This thread has been incredibly thorough and helpful! I'm also considering transferring my personal vehicle to my S-Corp and appreciate seeing all the different approaches and real-world experiences shared here. One additional consideration I wanted to mention - make sure to think about how this affects your personal transportation situation if something happens to the vehicle. Since the business will own it, you can't just go out and replace it with personal funds if it breaks down or gets totaled. Your business needs to have a plan (and budget) for repairs or replacement, which might mean keeping more cash reserves than you otherwise would. Also, I've been researching the state tax implications that @ac1b2919e0aa mentioned, and it varies significantly by state. Some states treat this as a taxable sale requiring sales tax, while others have exemptions for transfers to entities you own. In my state (California), there's actually a specific form you can file to avoid paying sales tax on transfers to your own business entity, but you have to file it within a certain timeframe. For anyone considering this strategy, I'd recommend running the numbers on both the standard mileage deduction versus actual expenses before making the transfer. With the current standard mileage rate being pretty generous, the actual expense method only makes sense if your vehicle-related costs (including depreciation) significantly exceed what you'd get with the per-mile deduction. The consensus seems to be that proper documentation is absolutely critical, so I'm planning to consult with both my CPA and attorney before proceeding to make sure I have everything structured correctly from the start.

This has been an absolutely fantastic thread with so much practical advice! As someone who's been on the fence about transferring my personal vehicle to my S-Corp, reading through all these real experiences has been incredibly valuable. I wanted to add one consideration that I learned about recently - the impact on your business's financial statements. When you sell your personal vehicle to your S-Corp, it shows up as both an asset (the vehicle) and a liability (the loan owed back to you) on your business balance sheet. This can affect certain business metrics if you ever need to apply for additional business credit or if you're considering bringing in investors down the road. Also, for those worried about the IRS questioning this arrangement - my CPA mentioned that as long as you're treating it as a legitimate business transaction (fair market value, proper documentation, reasonable interest rate, actual business use), it's a completely acceptable tax strategy. The problems arise when people try to inflate values or don't maintain proper records. One practical tip: I ended up creating a simple spreadsheet to track all the moving pieces - monthly loan payments, business vs personal mileage, maintenance expenses, insurance costs, etc. Having everything in one place makes it much easier when tax season comes around and helps ensure you're capturing all the deductible expenses you're entitled to. Thanks to everyone who shared their experiences - this thread should be required reading for any S-Corp owner considering this strategy!