I was talking to my bank the other day about financing a property. They want 25% down. She was thinking of some ways to come up with the down payment and mentioned making my truck a company vehicle. My truck is almost paid for and has a book value equal to what I need. Her idea was to have the LLC where I hold my properties borrow against the truck and thereby make it a company vehicle. Is it ok to do this? Are there any restrictions on usage of the truck after the change? How will this look on my taxes? This year, I claimed mileage because I don’t have a company vehicle? Will the truck just be depreciated and I’ll take that write-off instead of mileage next year?
My father-in-law owns a nursing home and has his car listed as one of the company vehicles, but he drives it wherever he wants whether it be for business or not. Will I be able to do the same and is there anything special I need to do in order to use the truck like this?
Thanks.
having hte LLC borrow against the truck does not make it a “company vehicle” any more than painting it red makes it a fire truck.
what makes it a company vehicle are
- who owns it and
- is it used for business.
personal use of a vehicle is never deductible. business use is always deductible.
if you own it, you can deduct business mileage for a personal (Sch C) business or someone else’s convenience (itemized deduction). Or your employer or the LLC may reimburse you at the IRS rate for the mileage - not income to you, deductible to the business.
if the LLC owns the vehicle, then the LLC should send you a W-2 at the end of the year for any personal use of the company vehicle.
regardless of who owns it, a mileage log should be kept to substantiate the deduction/reimbursement/W-2.
Mark,
Thanks for your response. I’ve read a lot of your posts on here and appreciate your willingness to help everyone out.
My banker wanted me to have the LLC borrow against the truck, but she mentioned re-titling the truck in the LLC name which she said would require the business to get insurance on the truck. She then mentioned depreciating the value of the truck instead of claiming mileage.
Is there a way I can have the LLC borrow against the truck (using the title as collateral), but keep the title and insurance in my name? I would then like to just claim the mileage for business purposes. I would think doing it like this would be similar to me personally guaranteeing a loan for my LLC with my personal credit.
I really want to keep things as simple as possible.
Thanks.
If you want to keep it simple, take out a personal loan with your truck as collateral. Then, YOU lend the money to the LLC on the same terms as your truck loan.
No need to retitle the truck, no need to get reinsured.
Just how I see it.
Agreed…that would be easiest, but my banker’s end goal is to get me the money while keeping the debt off the personal side of my credit. That’s why she wants the LLC borrowing the money. I’m hoping there’s a way to do that without me borrowing my money in my name.
Why is puting the truck in the company name so important to your banker? Why is it her goal for the bank to make a loan to your company with your truck as collateral? Why do you care if there is a personal loan in your name that provides the downpayment needed for your company to get a loan to purchase the property?
Can the bank make the loan to your company if you provide the cash for the downpayment, or, does the banker have an agenda that you don’t know about?
The truck is worth almost the exact amount I would need for my down payment for the new property. Her idea was that it would be the one single transaction that would give me enough money to have my down payment. I want to keep things like this out of my personal name as much as possible to keep from affecting my personal credit score and loan worthiness. She has other clients who keep putting things in their personal name and they get themselves to the point they can’t buy any more properties. I’m confident the bank will give the company the loan, but this is my way of getting the down payment now rather than waiting several more months.
it sounds like a small loan. it shouldn’t be this hard.
will she loan to the LLC with just a personal guarantee from you?
will she loan to the LLC and hold the title to your truck as collateral, even though the title remains in your name?
Yes, the loan in the big scheme of REI isn’t that big. I need just over $36K for my 25% down payment. Probably a little large for me to expect to get a personal loan with no collateral. I really want to try the route of the bank holding the title as collateral, but leaving it in my name. I didn’t know if there was any definite way to do this or not. I was hoping to tell her, “I talked to a CPA and here’s what I’d like to do.” We’ll see. I’m still waiting on the Realtor to provide me with all the information and the property has been on the market for about 5 months anyway. Once again, thanks for all the help. I appreciate the guidance.
And how is this different from what you are doing? After the truck is titled to the LLC and the loan is made to the LLC with the LLC’s assets (your truck) as collateral, what will you have to do the next time you want to buy something? What will you have to contribute to the LLC to collateralize the next loan?
When will you get to the point that your LLC can’t buy any more properties becuase you don’t have anything left to contribute?
This will likely be my last purchase for a couple years. In the mean time, I’ll be paying down some personal debt and letting my business income build until I’m able to finance the next purchase.