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Most people here will disagree with the premise of the question, so try to disregard that (and that I know this is likely a very bad idea).

I'm considering buying a (new) car that I can't afford (unimportant details below), and I'm thinking about starting to drive for ridesharing apps on the side.

How much of the cost of the car (or the monthly payments) can I deduct from the income of the business, seeing how the car is obviously necessary for the business? The same question goes for insurance. The car will obviously be used privately by me as well.

Does the car need to be purchased by or registered to the company? The plan obviously is the buy the car, then start the business.

Is there anything I need to do in recordkeeping or budget to be able to deduct the cost of the car from the income of the business?

Could I let the business rent the car from me for the whole cost of the car regardless of the profit of the company?

Unimportant details about my finances:

I have a 401k that I just took a loan from to pay off credit card debt and other stuff. I don't have emergency savings (I do have enough in credit card credit lines to make it 6 months but logistics would be extremely difficult on getting money to pay mortgage/car payment.

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    Your first paragraph sounds like you plan on driving for Uber or Lyft, but the rest reads like you plan on incorporating your own rental fleet of one car. – Nuclear Wang Dec 11 '18 at 21:30
  • No I plan on doing the uber/lyft thing. I was just wondering if I could rent my car to my business which I then use to drive for uber. – xyious Dec 11 '18 at 21:35
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    Please, please, please pay back your 401(k) loan before starting any new business or buying a car you can't afford. Do some searches on this site and other sites on 401(k) loans and see if you find any that recommend it. And credit cards are not emergency funds. How do you expect to pay the credit cards if you can't pay for the emergencies? – D Stanley Dec 11 '18 at 22:22
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    Why the S-Corp tag? – Hart CO Dec 11 '18 at 22:32
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There's a lot of accounting that you need to understand.

In broad terms:

  • If you form any sort of business, you're going to form something that just passes-through to you. So there's no "company renting the car from me" you're the company.

  • If you were to buy the car, then the interest paid on the loan is deductible and the asset is depreciated separately. You'll have an asset, the car, a liability, the loan, and expenses in the form of interest cost on the loan and various expenses related to operating the car. Generally, companies lease things. The whole lease payment is the expense and it's generally easier that way because you don't own an asset to depreciate.

    • Buy or lease, you'll have to adjust whatever you end up doing based on the car's use in the business as you probably won't be using it 100% exclusively for business.

In any case I'm considering buying a (new) car that I can't afford is an awful idea. Begin with the lowest possible cost, upgrade as needed. Don't set off from an unsustainable place...

  • I'm not trying to buy a car to start the ridesharing thing, I'm trying to start the ridesharing thing to pay for the car I can't afford. – xyious Dec 12 '18 at 17:01
  • So from a tax standpoint is a passthrough business handled the same as if I did everything as an individual ? – xyious Dec 12 '18 at 17:03
  • So you already have the car? – quid Dec 12 '18 at 18:03
  • No. But I have already ordered the car (put deposit down, which isn't refundable, not sure if I could get it back if I fail to secure financing). I was going to buy the car anyway, it's just that the timing was dictated by outside influence. I would have been far better off buying it next year or the year after, but there was a small window of getting $7,500 tax credit and getting the car. – xyious Dec 12 '18 at 18:39

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