Business Owned Automobile

By Jason Watson, CPA
Posted Friday, November 3, 2023

If the business truly owns the car, then it should be titled in the business’s name. Having said this, loan and lease terms might be crummy. Another concern is higher insurance rates. It appears that most auto policies will charge a higher premium for cars owned by a business for business purposes. While the insurance businesses are regulated and must demonstrate the need for the premiums being charged, the higher amount appears to be a money grab.

Some insurance businesses will allow you to title in the business name and your name as joint tenants with rights of survivorship (JTWROS). This satisfies the IRS’s need for titling, and it might allow you to insure the automobile with a personal insurance policy. Talk to your insurance agent.

If you buy the automobile yourself and then transfer it to the business, you might be on the hook for sales tax twice (technically) although recently Departments of Motor Vehicles are understanding that a transaction did not take place. Also, your title might have a lien on it making it challenging to change titling and names.

Under Section 163(j) there is some relief. The automobile may be listed as an asset on the business’s books (balance sheet). Specifically, and in the case of a Partnership or S Corp, since the taxpayer owns both the pass-through entity and the asset, the taxpayer is both the legal and equitable owner of the asset. Therefore, depreciation expense may be deducted, and loan interest may be deducted even if the loan is in the individual’s name.