Writing off Your Vehicle Under a Montana LLC

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Another question we get a lot is about how to write off vehicles because they are being used as work vehicles. While this isn’t necessarily in our wheelhouse, as this is a federal tax issue and not a title or registration topic, it has come up often enough to warrant further investigation into the topic. 

Finding these images of Montana never gets old.

Specifically, the questions come from folks who are using their vehicles to live full-time, which often means they are also using it as an office for their work (assuming they work online or are “digital nomads”). And this is totally reasonable: people who are “full-timing” or living the “van life” would like to register in Montana through an LLC to save sales tax but also write off the vehicle to save on federal taxes. We are going to take a look at this from a common sense approach and provide the information we find to determine when and how to write off a vehicle registered to a Montana LLC. Of course, we are NOT tax professionals or attorneys; we’re just here to share the information that we know.

Note: We are enthusiasts, not attorneys. This is not legal or financial advice.

What Is Section 179?

According to Investopedia.com, Section 179 of the IRS code is:

“an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time. The Section 179 deduction can be taken if the piece of equipment is purchased or financed and the full amount of the purchase price is eligible for the deduction.”

So, your business can take an immediate deduction for business expenses rather than having to wait. This pertains specifically to depreciable assets, which include vehicles. Of course, if your office is an RV of some kind because you also live in it full-time, it seems plausible that it would fit the bill. 

Image by Steve Buissinne from Pixabay

What does the IRS themselves say about it? 

“The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business, and if the taxpayer elects, qualified real property.” 

So, Can I Deduct an RV?

According to the IRS, as a business owner, you’re entitled to write off a vehicle if it’s used entirely for business purposes. You can deduct part of the vehicle’s cost if it's used only partially for business.

At the same time, generally speaking, you’re allowed to write off almost any expense that is functionally essential to your business - the electric bill at an office you own, new light bulbs for that office, and so on. And according to The Professional Hobo, digital nomads are able to write off a whole slew of things most people cannot.

Combine these two elements and you have a solid argument for a digital nomad’s RV being both essential to their job (as a vehicle) and being the actual place their work occurs (an office on wheels).

Unfortunately, there’s no easy answer here. Whether you can deduct an RV or not basically comes down to specific elements of your situation, like how much time you spend working versus living in your RV. Our best suggestion is to find a reputable tax accountant and ask them if your situation qualifies your RV for a Section 179 write-off. Also, they will be far more knowledgeable about any other write-offs that might apply to your specific situation than whatever you will find on the internet – you will likely end up getting many things written off you had never considered before.

Section 179 is a business function and was written for the sake of businesses. If you don’t use your vehicle for business, you’re probably best to look for other methods to ease your tax burden. Again, talking to an accountant is your best bet to ensure you are fully legal.

How Much Can I Deduct From A Qualifying Vehicle?

According to Section179.org, for passenger vehicles, trucks, and vans that are used over half the time for qualifying business use, the total deduction is capped at $11,160 for cars and $11,560 for trucks. 

We will warn you: when you start digging into any regulatory documents, whether it be statutes, federal or state codes, or even just the forms, the language is almost always hard to interpret and hard to read. This isn’t meant to dissuade you from pursuing write-offs; it’s more a warning to get professional help if or when you reach the point that it isn’t making sense anymore. Seriously, the devil is in the details. 

Here is an example of the text from the IRS Form 2106, Employee Business Expenses: 

“Depreciation limits on vehicles. The additional first-year limit on depreciation for vehicles acquired before September 28, 2017, is no longer allowed if placed in service after 2019. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2021 is $18,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2021, the amount is $10,200. The portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $26,200. If you are claiming a section 179 deduction on other property, or you placed more than $2,620,000 of section 179 property in service during the year, use Form 4562 to figure your section 179 deduction. For more details, see the discussion under Section D, later.”

Also, see the logic tree:

Please don’t misinterpret this as my taking swipes at the IRS because it isn’t. 

After a two-decade career in the federal government, I’m extremely familiar with the style and language used in their regulations and code. It is vague and hard to follow. And if you get it wrong with the IRS, it can land you in jail with hefty fines. It’s not worth trying to save a few thousand on deductions.

If you have ANY concerns about the legality of your deductions, please talk to a tax accountant or tax lawyer to go over your stuff. The few hundred you pay them could keep you out of jail or save you tens of thousands of dollars in fines. 

Will It Affect My Montana LLC?

Again, that question will vary greatly depending on your specific situation. There isn’t one conclusive answer about what the overall effect would be if you are going to use a Montana LLC for your vehicle and plan to write it off under Section 179.

This is a delicate legal issue, so please pursue a professional opinion on the exact impact. What we do know, though, is that you can easily form a Montana LLC that will save you a bunch of money, both in the short term and over the long term. 

Bank Financing and My LLC 

We recently talked about this exact topic and fleshed out a lot of the details with financing and using an LLC. See, you can’t have a lienholder on your title and put that vehicle in an LLC. 

However, a few companies are restructuring just how the industry works. Our favorite is LightStream, a loan service that provides loans for all kinds of things, including some that used to be much harder to come by. 

The key advantage to LightStream loans is that they issue you cash instead of placing themselves as a lienholder on the title. This frees you up to purchase any qualifying vehicle as a cash purchase and hold the title outright from day one. This takes away much of the apprehension about pursuing the Montana LLC route. We get it, too. It’s not easy to save up fifty grand for a car than fork it over. But at the same time, it’s hard to scoff at saving upwards of five grand on sales tax if you have the opportunity. LightStream lets you still finance your vehicle purchase(s) while allowing you the opportunity to move the vehicle to another state without needing a lienholder’s consent.

As a LightStream affiliate, we may be compensated if you use their services through the links on this page. LightStream did not commission, sponsor, or fund this post.

Wrapping Up

This article was a process of turning up the information we could and allowing it to take us to an accurate conclusion. Unfortunately, we can’t offer much advice for your exact situation, though we encourage you to check out the links in the article. But this is a topic where you probably should not just ‘wing it;’ find a reputable accountant, take all of your info to them, and let them tell you what’s what. And if it’s legal in nature, find a tax attorney and consult them. The two hundred bucks you’ll spend on a consultation could save you thousands, so call a professional who lives and breathes taxes for tax advice, and call us for what we do best: forming a Montana LLC and registering your vehicles to it.

We are enthusiasts who believe that every vehicle has a place on the road. If that’s what you are into, make sure to check out our line of vehicle titling and registration services for just about anything with wheels. We also provide services to get your OHV street legal, whether it’s a dirt bike, an ATV, UTV, or even a decommissioned army truck! Whatever it is, we can help.