Steering Clear Of IRS Problems: Should You Buy That Vehicle Through Your Business?

Thinking about buying a van for your business? Read this first.

A friend of mine sent me a quick message the other day: “Hey there! I’m thinking about buying a van. Should we purchase it through the business/LLC? Are there hoops we need to jump through? Is it even worth it?”

On the surface, that seems like a straightforward question. But here’s the truth: whether or not you should buy a vehicle through your business is one of those “simple” decisions that can get messy fast, especially if you want to stay on the IRS’s good side and maximize your tax benefits.

Because here's the deal: just because you can buy something through your business doesn’t always mean you should. In this article, we’ll walk you through the key questions to ask, mistakes to avoid, and how to confidently decide if buying a vehicle through your business makes sense, for tax savings and audit protection.

Step 1: Ask the Right Questions Before You Buy

Before pulling the trigger on that van, truck, or SUV, the most important thing you can do is pause and ask two key questions:

1. How is this vehicle directly tied to your business operations?

This is where most people get tripped up. The IRS isn’t interested in whether a business owns a vehicle—it cares whether that vehicle is necessary for your work.

Ask yourself:

• Does the vehicle support income-generating activities?

• Is it required for delivering goods, transporting equipment, or meeting with clients regularly?

• Would the business suffer if this vehicle wasn’t available?

If you can’t clearly connect the dots between your vehicle and your business operations, buying it through the company could raise red flags.

2. Will the vehicle be used 100% for business, or split with personal use?

If there’s any personal use (even just running errands or school pickups), that needs to be documented and accounted for. Why? Because only the business-use portion is deductible.

And if it’s mixed use? That opens up more complexity.

Things like:

• Allocating expenses

• Keeping mileage logs

• Possibly triggering fringe benefit income

Quick Gut Check:

If you're telling yourself, “Well, I can probably justify this as a business vehicle,” stop and rethink. The IRS is waiting for that “probably” to pick it apart. Remove the guesswork stay out of trouble.

Real-World Case Study: When Buying Through the Business Backfires

Let me tell you about a client we worked with a while back,  we’ll call him Mike.

Mike was a loan processor who worked exclusively from home.  He was the kind of guy who lived inside spreadsheets and underwriting portals. His business had no physical inventory, no job sites, no clients to shuttle around,  just a home office and an internet connection and he’s off to the races making a great living for him and his family.

But one day, Mike showed up proudly driving a brand-new, heavy-duty diesel truck—purchased through his S-Corp. When we asked about it, he said: “It’s for the business. I need it to get to the occasional office meeting. And it makes towing my RV trailer a breeze!”

Here’s the problem:

• His business didn’t actually require a vehicle.

• His driving was minimal—maybe one meeting per month.

• There was no consistent, documented business use.

While the truck may have been owned by the business, it wasn’t being used by the business in any meaningful way.  And that distinction matters—a lot.

Bottom line? Mike was exposing himself to IRS scrutiny, potential disallowed deductions, and headaches he didn’t need. Not to mention, he missed out on a more efficient personal mileage reimbursement strategy.

Pro tip: Just because your business buys something doesn’t make it a business expense. Use must match intent. If it’s not “ordinary and necessary,” it’s not deductible.

The Tax Angle: What the IRS Is Really Looking For

When it comes to vehicles and deductions, the IRS isn’t playing games. Their job is to protect tax revenue, and business vehicles are one of the most abused deduction categories out there.

That means if you’re going to buy a vehicle through your business, you need to know what the IRS is actually paying attention to.

1. Nature of Your Business

The first thing the IRS considers is what you do for a living.

For example:

• A general contractor? A heavy-duty business vehicle like a truck makes sense.

• A traveling notary? Absolutely.

• A graphic designer who works from home and never leaves the house? Not so much.

If your business doesn’t clearly require a vehicle to operate, deducting one can raise some serious red flags.

2. Business Use Percentage

If a vehicle is used for both business and personal reasons, only the business-use portion is deductible. You’ll need:

• A mileage log
• Purpose of each trip
• Total miles driven during the year
• Odometer readings at the start and end of the year

If you can’t produce a milage log in the event of an audit then you’re facing the reality that there is no deduction.  The IRS will slap that deduction down and assess penalties on top of the taxes that you now owe.

3. Vehicle Type and Cost

High-end or luxury vehicles invite extra scrutiny. Trucks and SUVs over 6,000 pounds also qualify for bonus depreciation under Section 179.

Pro tip: Just because something qualifies on paper doesn’t mean it passes the “smell test” with the IRS if your business type doesn’t reasonably justify it.

Think of our friend Mike above. In what reality is a large gas-guzzling truck like that needed for a loan processor? It clearly is not a need and therefore would not be allowed.

What Qualifies as Legit Business Use?

Let’s get specific,  because if you’re trying to make a tax-savvy decision about purchasing a vehicle through your business, it helps to know what actually counts.  Here's the short version: the more clearly your vehicle is used to generate revenue or support core operations, the stronger your case.

Examples of Strong Business Use Cases:

• Contractors, landscapers, or service-based trades: Hauling tools, equipment, or supplies to and from job sites.

• Real estate professionals: Driving to showings, open houses, or client meetings.

• Delivery or mobile businesses: Florists, food trucks, mobile pet groomers—anyone who uses a vehicle as part of their business model.

• Sales reps or consultants: Regularly traveling to meet with clients or prospects.

In these cases, the vehicle is essential, not just convenient.

 Examples of Weak Business Use Cases:

• Working from home with occasional office visits.

• Using the vehicle to commute (commuting is never deductible).

• Vague or undocumented “business use” without mileage tracking.

• Claiming full business use on a clearly personal vehicle (e.g., family SUV or luxury sedan).

Remember, if you’re having to stretch logic and reasoning to explain why your business needs that vehicle, it probably isn’t a legitimate business asset.

Structure & Strategy: When It Does Make Sense

Alright—let’s say your business truly does need a vehicle. 

You’ve checked the boxes: it’s used regularly for client work, deliveries, hauling gear, or travel. 

So now the question becomes: how do you structure this the right way to get the tax benefits without triggering problems?

Here are a few smart, compliant strategies:

1. Section 179 + Bonus Depreciation (For Qualified Vehicles)

If the vehicle is over 6,000 pounds and used over 50% for business, you may be able to:

• Write off up to 100% of the purchase price in the first year

• Use Section 179 and/or bonus depreciation (yes—even for used vehicles)

Warning: The IRS knows people abuse this with luxury SUVs and trucks. Make sure your business use is legitimate and well-documented.

2. Use an Accountable Plan (for Mixed Use or Personal Vehicles)

Let’s say you buy the vehicle personally but use it for business part-time. 

An Accountable Plan allows your business to:

• Reimburse you tax-free for actual business use

• Deduct those reimbursements as expenses

This is great for S-Corp owners and avoids fringe benefit issues, but requires:

• Written plan

• Clear expense tracking

• Reimbursements within 60 days

For more information about Accountable Plans, you should check out the resources in our Resource Center, all about Accountable Plans and how to really optimize your deductions for your business!

3. Avoid the “Fringe Benefit Trap”

If you buy a vehicle through the business but also use it personally (or let employees use it personally), it’s considered a fringe benefit—and may trigger taxable income.

Solution: Track personal use and properly report it on W-2s, or restrict personal use altogether and back it up with mileage logs.

4. Lease vs. Buy Considerations

Sometimes leasing through the business offers cleaner accounting and better deduction control, especially if:

• You drive fewer miles
• Don’t plan to keep the vehicle long term
• Want to avoid depreciation calculations

Our Thoughts:

Yes, buying a vehicle through your business can make sense,  but only when the structure, documentation, and purpose align with tax law.

What to Do Instead (If It’s Not 100% Business)

So maybe the van (or SUV or truck) isn’t fully used for business. That doesn’t mean you’re out of options, you just need a different approach.

In fact, if your vehicle is used for both business and personal purposes (as is often the case), these strategies can be more tax-efficient and audit-proof than buying it outright through the business.

Option 1: Buy It Personally and Reimburse Yourself

If you’re an S-Corp or C-Corp owner, one of the cleanest moves is to buy the vehicle personally and use an Accountable Plan to:

• Track business mileage

• Reimburse yourself tax-free per IRS rates (currently $0.67/mile for 2024)

• Deduct those reimbursements as a business expense

Bonus: This avoids depreciation limits and simplifies recordkeeping. It also keeps the vehicle off your corporate books, which is often a win.

Option 2: Lease Personally and Deduct Business Use

Leasing the vehicle in your personal name and tracking business mileage allows you to:

• Deduct the business-use portion of lease payments

• Deduct business-related gas, maintenance, and insurance

• Avoid complicated asset depreciation rules

This is great for vehicles used less than 100% for business.

Option 3: Keep It Personal and Track Business Use with Mileage Apps

Sometimes the most straightforward path is:

• Keep the car personal

• Use an app like MileIQ or Everlance

• Log every business trip with purpose and mileage

• Deduct business mileage on your Schedule C (sole proprietors) or via reimbursement (S-Corp/C-Corp)

This is especially smart for:

• Coaches, consultants, creatives

• Remote professionals who only occasionally drive for work

What NOT to Do:

• Don’t buy it through your business and just assume it’s 100% deductible.
  

• Don’t skip the mileage log.
  

• Don’t “round up” your use to make it seem more business-focused.

Those are the fastest ways to attract IRS attention.

Pro Tips to Stay Audit-Proof

If you decide to use a vehicle for business—whether it’s owned by the company or personally—your next goal should be crystal clear: stay compliant, stay clean, and stay out of IRS trouble.

The IRS loves to dig into vehicle deductions. But the good news? You can protect yourself with simple, proactive steps.

1. Keep a Mileage Log

This is non-negotiable.

Use a digital app (like MileIQ, Everlance, or TripLog) to:

• Record date, purpose, and mileage of each business trip

• Track odometer readings at the beginning and end of the year

• Separate personal and business use clearly

Pro Tip: Automate the process. The best apps run in the background and save everything for you.

2. Implement an Accountable Plan (if reimbursing yourself)

If you own an S-Corp or C-Corp, an Accountable Plan is your friend. It allows your business to:

• Reimburse you for business-related vehicle use

• Treat it as a deductible expense for the business and tax-free income for you

But: the plan must be written, documented, and strictly followed.

3. Create a Company Vehicle Policy (for corporate-owned vehicles)

If the vehicle is in the company’s name:

• Define rules for personal use
• Require mileage tracking
• Outline expectations for maintenance, insurance, and reporting

Include this in your corporate minutes or employee handbook—especially if other team members drive the vehicle.

4. Track All Costs Separately

If you’re deducting actual expenses (rather than mileage), track:

• Gas

• Insurance

• Maintenance

• Repairs

• Registration

• Depreciation or lease payments

Keep receipts, statements, and end-of-year summaries.

5. Don’t Create “Commute” Confusion

Commuting from home to your regular office is NOT deductible. Only travel between business locations, to client meetings, or for operational needs counts as business miles.

Final Thought: If you’re unsure, ask yourself: “If I had to defend this deduction in front of an IRS agent tomorrow, do I have the proof?” If the answer is yes, you’re in good shape.

Bottom Line: It Depends — But Be Intentional

When buying a vehicle through your business, there’s no one-size-fits-all answer.

The right decision comes down to one thing: intentionality.

• If the vehicle is essential to daily operations and is used nearly 100% for business? Buying it through the business might make sense, if done properly.

• If it’s used part-time or mostly for personal convenience? You’re likely better off buying or leasing it personally and using a mileage or reimbursement strategy.

Ask Yourself:

• Is this purchase ordinary and necessary for my specific business?

• Can I clearly document business use?

• Is there a simpler, more compliant way to achieve the same tax savings?

The CLEAR EDGE Framework teaches us to prioritize smart structure and deduction maximization—but also to get organized and efficient. That means matching your strategy to your reality, not just chasing a deduction because someone else “wrote off their truck.”

Smart Tax Moves Are Planned, Not Hoped For

The truth is: your vehicle decision can either be a tax-saving asset or an audit-risk liability. 

The difference? Proper strategic planning.

Take the Wheel on Your Tax Strategy

If you’ve made it this far, here’s what you already know:

• Not every business vehicle should be bought through the business.
• The IRS is watching.
• The right structure and documentation make all the difference.

Now it’s time to take action. If you have questions, reach out and start a conversation.