# LLC and mileage (and insurance)



## Harry Seaward (Mar 7, 2017)

I want to minimize the number of insurance policies I have. I can title my cars in the name of my LLC (which is a wholesale auto dealership) and then have them covered under the LLC policy but then it seems I can no longer use the standard mileage deduction for taxes. At first blush it seems I would be loosing a huge tax deduction not being able to claim the tens of thousands of rideshare miles. I think the LLC will operate at a loss next year, but the rideshare mileage deduction is nice to wipe out the tax liability from my wife's 9-5.

Anyone have any experience with titling their cars in the name of their LLC? Are there enough business deductions to come close to the standard mileage deduction?


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## UberTaxPro (Oct 3, 2014)

Harry Seaward said:


> I want to minimize the number of insurance policies I have. I can title my cars in the name of my LLC (which is a wholesale auto dealership) and then have them covered under the LLC policy but then it seems I can no longer use the standard mileage deduction for taxes. At first blush it seems I would be loosing a huge tax deduction not being able to claim the tens of thousands of rideshare miles. I think the LLC will operate at a loss next year, but the rideshare mileage deduction is nice to wipe out the tax liability from my wife's 9-5.
> 
> Anyone have any experience with titling their cars in the name of their LLC? Are there enough business deductions to come close to the standard mileage deduction?


How many cars are in the LLC fleet?


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## Mars Troll Number 4 (Oct 30, 2015)

Harry Seaward said:


> I want to minimize the number of insurance policies I have. I can title my cars in the name of my LLC (which is a wholesale auto dealership) and then have them covered under the LLC policy but then it seems I can no longer use the standard mileage deduction for taxes. At first blush it seems I would be loosing a huge tax deduction not being able to claim the tens of thousands of rideshare miles. I think the LLC will operate at a loss next year, but the rideshare mileage deduction is nice to wipe out the tax liability from my wife's 9-5.
> 
> Anyone have any experience with titling their cars in the name of their LLC? Are there enough business deductions to come close to the standard mileage deduction?


Well.. that depends...

If you have a big enough fleet and the vehicls are ALL used for "business" or renting out, you can write off all the vehicle purchases and all the mechanical work as business expenses.


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## Harry Seaward (Mar 7, 2017)

UberTaxPro said:


> How many cars are in the LLC fleet?





Mears Troll Number 4 said:


> Well.. that depends...
> If you have a big enough fleet and the vehicls are ALL used for "business" or renting out, you can write off all the vehicle purchases and all the mechanical work as business expenses.


The normal fleet would be 2 cars - mine and my wife's. I do all of my own maintenance and repairs. In 2017 I spent right around $1,000 on maintenance and repairs for both cars (tires, oil, wheel alignments and a couple minor mechanical repairs). The LLC would be buying and selling cars, but I think they would be classified as "inventory", and would have very few miles put on them anyway.

For 2017 I'll have about $8,000 using the standard mileage deduction. I just can't see a way to come anywhere close to that by having the cars in the name of the LLC.


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## UberTaxPro (Oct 3, 2014)

Harry Seaward said:


> The normal fleet would be 2 cars - mine and my wife's. I do all of my own maintenance and repairs. In 2017 I spent right around $1,000 on maintenance and repairs for both cars (tires, oil, wheel alignments and a couple minor mechanical repairs). The LLC would be buying and selling cars, but I think they would be classified as "inventory", and would have very few miles put on them anyway.
> 
> For 2017 I'll have about $8,000 using the standard mileage deduction. I just can't see a way to come anywhere close to that by having the cars in the name of the LLC.


All entities, Corporations, LLC's , sole proprietors etc... can use the SMR to deduct business miles so there is no reason you can't use the SMR with a vehicle or vehicles owned by your LLC. The only restriction is for fleets of 5 or more vehicles, they have to use actual expenses. It would also be a good idea to have the Uber income go into the LLC's bank account or at least on the LLC's books. The income or loss would pass-thru to your individual return. 
What was it that made you think you can't use the SMR deduction for vehicles owned by an LLC?


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## SEAL Team 5 (Dec 19, 2015)

UberTaxPro said:


> What was it that made you think you can't use the SMR deduction for vehicles owned by an LLC?


The way I'm understanding this from OP's first post is that he wholesales cars and wants to deduct Uber miles from the profit/loss of the sale. Don't you list type of business and business use when creating an LLC? Wouldn't that throw up a red flag to have deductible miles/expenses from a completely different business?


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## UberTaxPro (Oct 3, 2014)

SEAL Team 5 said:


> The way I'm understanding this from OP's first post is that he wholesales cars and wants to deduct Uber miles from the profit/loss of the sale. Don't you list type of business and business use when creating an LLC? Wouldn't that throw up a red flag to have deductible miles/expenses from a completely different business?


Most attorney's will tell you it's not a good idea to operate two separate businesses under one LLC for a lot of legal reasons. You could loose both businesses from a lawsuit against either one is the big reason I guess. However, there is nothing in the tax code preventing it. A single member LLC is a pass thru entity so the income will just go on a schedule c just like a sole proprietor. And, just like a sole proprietor would do if he/she had two businesses, file 2 schedule's c's for the separate business entities.

LLC application requirements are different for every state and vary as to what information they want. I don't know of any that prohibit multi/business activities.

The single member LLC is a disregarded entity by the IRS so I don't think it would throw up any more red flags than a sole proprietor with 2 businesses.
IRS will just be looking at the bottom line. It might throw up some red flags with the OP's insurance company!

Uber also might require the OP to register his LLC with them when they see an insurance card in the LLC name.


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## SEAL Team 5 (Dec 19, 2015)

UberTaxPro said:


> Most attorney's will tell you it's not a good idea to operate two separate businesses under one LLC for a lot of legal reasons. You could loose both businesses from a lawsuit against either one is the big reason I guess. However, there is nothing in the tax code preventing it. A single member LLC is a pass thru entity so the income will just go on a schedule c just like a sole proprietor. And, just like a sole proprietor would do if he/she had two businesses, file 2 schedule's c's for the separate business entities.
> 
> LLC application requirements are different for every state and vary as to what information they want. I don't know of any that prohibit multi/business activities.
> 
> ...


Damn you're good. Thank you for the info.


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## Harry Seaward (Mar 7, 2017)

UberTaxPro said:


> What was it that made you think you can't use the SMR deduction for vehicles owned by an LLC?


https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh
About 1/2 way down it says the mileage rules for an LLC are the same as an S Corp. Under S Corp it says vehicles owned by the business must use actual operating expenses.



SEAL Team 5 said:


> The way I'm understanding this from OP's first post is that he wholesales cars and wants to deduct Uber miles from the profit/loss of the sale.


The auto dealership will have little income and plenty of deductions so I'm not worried about a tax liability there. What I'm more interested in is using my Uber miles to offset the amount of taxes owed on my wife's w-2 earnings.


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## UberTaxPro (Oct 3, 2014)

Harry Seaward said:


> About 1/2 way down it says the mileage rules for an LLC are the same as an S Corp. Under S Corp it says vehicles owned by the business must use actual operating expenses.


*C - Corps* can't directly use the SMR, they have to reimburse the employee at the SMR rate to take advantage of the SMR. Sorry I wasn't clear on that. It doesn't impact you as an LLC or any other pass-thru entity at all.


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## Harry Seaward (Mar 7, 2017)

UberTaxPro said:


> *C - Corps* can't directly use the SMR, they have to reimburse the employee at the SMR rate to take advantage of the SMR. Sorry I wasn't clear on that. It doesn't impact you as an LLC or any other pass-thru entity at all.


That means not putting the vehicles into the name of the LLC, correct?


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## UberTaxPro (Oct 3, 2014)

*A. Single member/qualified joint venture.* First you should get legal advice to make sure you want to do that from a legal perspective. From a tax perspective, as long as your LLC is a single member LLC or a "qualified joint venture" with your wife as the only partner filing a joint return with you, you can title the vehicles in the name of the LLC and use the SMR deduction for the Uber vehicles. The cars for sale would be inventory like you stated. You can have up to 5 vehicles to use for your Uber fleet and still use the SMR in your single member or qualified joint venture LLC. To be a "qualified joint venture" you'll need to file an election with your tax return.

*B. Sub chapter s/multi member partnership. *For LLC's taxed as partnerships and LLC's taxed as s corps, you can still take advantage of the SMR it just gets a bit more complicated. With these entities you would title the vehicles in the individual employee name and create what is called an "accountable plan". With this in place the employee(can be the owner) turns in an expense report with the business mileage. The business then reimburses the employee based on the current SMR. The reimbursement is not taxable to the employee.

So, like everything else with taxes, it depends. *It depends on how your LLC is taxed.* If your LLC is multi-member taxed as a partnership or taxed as an s corp you fall under B. and would have to keep the vehicles titled in the individual name to utilize the SMR. Otherwise, as a single member/qualified joint venture LLC you'll fall under A. and you can title the vehicles in the name of the LLC and still use the SMR.

Great question! I should have asked you earlier how your LLC is taxed. I was assuming a single member or qualified joint venture LLC in the earlier responses as you didn't mention anything about being taxed as a sub s or partnership. When I read your concern about the sub chapter s issue I started to suspect that maybe you made the sub s election for your LLC to be taxed as a sub chapter s. I'm still not sure if your LLC is single member/qualified joint venture or sub s, so I gave it to you both ways.


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## Harry Seaward (Mar 7, 2017)

UberTaxPro said:


> From a tax perspective, as long as your LLC is a single member LLC or a "qualified joint venture" with your wife as the only partner filing a joint return with you, you can title the vehicles in the name of the LLC and use the SMR deduction for the Uber vehicles.


The IRS says "A Business Owned and Operated by the Spouses through a Limited Liability Company Does Not Qualify for the Election" (https://www.irs.gov/businesses/smal...for-married-couples-unincorporated-businesses) I'm trying to reconcile that with what you said above. (I'm not trying to be obstinate. I'm just an idiot trying to figure out how to best make this work.)


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## UberTaxPro (Oct 3, 2014)

Harry Seaward said:


> The IRS says "A Business Owned and Operated by the Spouses through a Limited Liability Company Does Not Qualify for the Election" (https://www.irs.gov/businesses/smal...for-married-couples-unincorporated-businesses) I'm trying to reconcile that with what you said above. (I'm not trying to be obstinate. I'm just an idiot trying to figure out how to best make this work.)


I don't think your trying to be obstinate at all! No offense taken - ever. I'm with you, let's get it right!
The link you sent is correct for most but you live in a community property state and I believe there are exceptions for community property states. I'm out and about now but when I get to my desk I'll check further. To get this right I need a bit more info...
1. How many members does your LLC have?
2. If it's 2 members is it you and your spouse?
3. How is your LLC taxed? Sub s, c Corp, partnership, or disregarded entity?


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## Harry Seaward (Mar 7, 2017)

UberTaxPro said:


> 1. How many members does your LLC have?


2


UberTaxPro said:


> 2. If it's 2 members is it you and your spouse?


Yes


UberTaxPro said:


> 3. How is your LLC taxed? Sub s, c Corp, partnership, or disregarded entity?


The LLC was formed in mid-2017, so this will be our first year filing a tax return since the LLC was created. I don't know if this has any significance, but there have been no purchases made under the name of the LLC. In the name of the LLC is a trade name certificate, a state tax license (transaction privilege tax), a Federal Tax ID, a checking account, a credit card that has never been used and a state issued wholesale auto dealer license. The only 'expenses' are the costs associated with initiating the items stated. For example, we paid about $400 so far for the dealer requirements (bond, fingerprints, license fees, change of address, etc). We also paid a few bucks for the LLC filings, trade name certificate and state tax license. And then bought some checks and had some service charges on the checking account. We have not purchased or sold any cars or other goods/services.


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## UberTaxPro (Oct 3, 2014)

Harry Seaward said:


> 2
> 
> Yes
> 
> The LLC was formed in mid-2017, so this will be our first year filing a tax return since the LLC was created. I don't know if this has any significance, but there have been no purchases made under the name of the LLC. In the name of the LLC is a trade name certificate, a state tax license (transaction privilege tax), a Federal Tax ID, a checking account, a credit card that has never been used and a state issued wholesale auto dealer license. The only 'expenses' are the costs associated with initiating the items stated. For example, we paid about $400 so far for the dealer requirements (bond, fingerprints, license fees, change of address, etc). We also paid a few bucks for the LLC filings, trade name certificate and state tax license. And then bought some checks and had some service charges on the checking account. We have not purchased or sold any cars or other goods/services.


What you want to avoid here is being taxed as a partnership. Partnership is the default for most spouses owned LLC's.
It appears to me that you meet the exception for defaulting to partnership status under Revenue Procedure 2002-69 https://www.irs.gov/pub/irs-drop/rp-02-69.pdf.
As long as you haven't filed form 8832 https://www.irs.gov/pub/irs-pdf/f8832.pdf selecting the partnership, c-corp, or Sub s elections your good.

The requirements that an LLC must meet to be a "qualified entity" are:


The business entity is wholly owned by a husband and wife as* community property under the laws of a state*, a foreign country, or a possession of the United States;
No person other than one or both spouses would be considered an owner for federal tax purposes; and
The business entity is not treated as a corporation under the applicable Treasury Regulations.
You can title your cars in the LLC name and file as a disregarded entity, using two schedule c's, one for you and one for your wife, allocating the LLC"s income or loss between the two of you and use the SMR to deduct Ubering miles.


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## Harry Seaward (Mar 7, 2017)

UberTaxPro said:


> What you want to avoid here is being taxed as a partnership. Partnership is the default for most spouses owned LLC's.
> It appears to me that you meet the exception for defaulting to partnership status under Revenue Procedure 2002-69 https://www.irs.gov/pub/irs-drop/rp-02-69.pdf.
> As long as you haven't filed form 8832 https://www.irs.gov/pub/irs-pdf/f8832.pdf selecting the partnership, c-corp, or Sub s elections your good.
> 
> ...


Excellent! Thank you.
Ok, now I'm working on TurboTax and it's telling me that a married couple that own a business together should each file a Schedule C and report their income and expenses according to the percentage of the business each spouse owns. I think that means if it's a 50/50 ownership, we tally up all income and all expenses and just whack them in half, and use those figures on each of our Schedule Cs.

I'm guessing these instructions apply to businesses co-owned in a non-community property state, but I don't see any options in here for community property states or "qualified entity", and a search for "qualified entity" in the TurboTax help turns up nothing. Is this something I'm going to have to do manually?


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## UberTaxPro (Oct 3, 2014)

Harry Seaward said:


> Excellent! Thank you.
> Ok, now I'm working on TurboTax and it's telling me that a married couple that own a business together should each file a Schedule C and report their income and expenses according to the percentage of the business each spouse owns. I think that means if it's a 50/50 ownership, we tally up all income and all expenses and just whack them in half, and use those figures on each of our Schedule Cs.
> 
> I'm guessing these instructions apply to businesses co-owned in a non-community property state, but I don't see any options in here for community property states or "qualified entity", and a search for "qualified entity" in the TurboTax help turns up nothing. Is this something I'm going to have to do manually?


The reason for the two schedule c's is to make sure you each get the proper allocation to social security and medicare taxes (Self employment taxes). If you made positive income you'll each have to pay your share of SE taxes. 
I would follow the turbo tax instructions and include a statement with your return stating that your electing to be taxed as a disregarded entity under Revenue Procedure 2002-69 if turbo tax has an option to add a statement. 
And/Or you could file form 8832 select box c under part one. I know box c states single member and you're really a 2 member entity but being in a community property state the IRS considers your LLC the same as a single member. You might want to write something on the form about Revenue Procedure 2002-69 also.


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