Can I Buy a Car Under My Business Name: The 6,000-Pound Rule

Yes, you can buy a car under a business name, as long as the business is a formal legal entity like an LLC, corporation, or partnership. The reason most owners do it is the tax math: for 2026, a qualifying vehicle purchase can produce a first-year write-off of up to $20,300 for a passenger car, or potentially the entire purchase price for a truck or SUV over 6,000 pounds. The paperwork is heavier than a personal purchase, and skipping steps can void your insurance or cost you the deduction you bought the car to get.

Which Businesses Can Actually Hold Title

LLCs, C-corps, S-corps, and partnerships are separate legal entities and can hold title in the company’s name. The entity has to be active and in good standing with the state where it was formed. If you’ve fallen behind on annual reports or franchise fees, the state can administratively dissolve the entity, and a dissolved entity can’t own property or sign contracts.

Sole proprietorships don’t work this way. There’s no legal wall between you and the business, so the title goes in your personal name even if the car is used entirely for work. You can still deduct business use on your taxes; you just don’t get the liability separation.

A DBA is not a separate legal entity either. You can’t title a vehicle to a DBA. The title has to go in the name of the actual legal owner, whether that’s you or a formal entity.

What You Need to Bring to the Dealership

Dealerships and lenders will ask for several documents before selling a vehicle to a business:

Your federal Employer Identification Number (EIN). This is the IRS-issued tax ID for the business and the primary identifier for financing, registration, and tax filings. You can apply online and receive one immediately.
Articles of Incorporation or Organization, proving the entity was legally formed with the state.
A corporate resolution or operating agreement showing that the person signing the purchase contract has authority to bind the business.
Proof of good standing. Some dealerships and lenders want a certificate from the Secretary of State confirming the entity is active.

On the paperwork, the buyer name has to match the legal business name on file with the state exactly, including any suffix like “LLC” or “Inc.” Use the company’s principal business address, not your home. A mismatch between the name on the title and the name on your formation documents creates problems at registration, during insurance claims, and at resale.

Commercial Auto Insurance Is Required

A vehicle titled to a business needs a commercial auto policy. Your personal auto insurance won’t cover a vehicle owned by a business entity, and personal policies typically exclude any vehicle used primarily for commercial purposes. A personal umbrella won’t fill the gap either, because most personal umbrellas exclude claims arising from business operations.

Commercial policies are issued in the business name with liability limits designed for commercial risk. If employees drive the vehicle, the policy should reflect that. Businesses whose employees also drive their own cars for work should look at hired and non-owned auto coverage, which protects the company when an employee causes an accident in a vehicle the business doesn’t own.

The Tax Payoff, and Why the 6,000-Pound Rule Matters

The tax benefits are the reason most owners buy through the business. A business vehicle is a depreciable capital asset, and the IRS gives you several ways to recover its cost — sometimes entirely in year one. But the rules split sharply based on what kind of vehicle you buy.

Passenger Cars Hit an Annual Cap

Section 179 lets you deduct the full purchase price of a qualifying vehicle in the year you place it in service. For 2026, the overall Section 179 deduction limit is $2,560,000, with a phase-out beginning at $4,090,000 in total equipment purchases. The vehicle must be used more than 50% for business to qualify at all.¹

The catch is that passenger cars are subject to annual depreciation caps that limit what you can actually deduct, regardless of the Section 179 election. For a passenger automobile placed in service in 2026 with bonus depreciation, the total first-year write-off (Section 179, bonus depreciation, and regular depreciation combined) is capped at $20,300. Without bonus depreciation, the first-year cap drops to $12,300.² The caps continue in later years: $19,800 in year two, $11,900 in year three, and $7,160 per year after that.

Bonus Depreciation Is Back to 100%

The One Big Beautiful Bill Act permanently restored 100% first-year bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.³ The phase-down schedule that would have cut bonus depreciation to 40% in 2025 no longer applies. For vehicles subject to the luxury auto caps, bonus depreciation raises the first-year limit from $12,300 to $20,300. Useful, but still a cap.

Vehicles Over 6,000 Pounds Escape the Cap

This is the rule that drives most of the tax planning. The IRS depreciation caps apply to “passenger automobiles,” defined as four-wheeled vehicles with a gross vehicle weight rating of 6,000 pounds or less. Vehicles that exceed 6,000 pounds GVWR aren’t passenger automobiles under the tax code, so the caps don’t touch them.⁴

A heavy SUV, pickup, or van over 6,000 pounds GVWR can qualify for a much larger first-year deduction. With 100% bonus depreciation permanent again, many of these vehicles can be written off entirely in year one. SUVs have a separate Section 179 cap of $31,300, but bonus depreciation can be claimed on the remaining cost above that, often producing a full first-year write-off for the whole purchase price.

You can find a vehicle’s GVWR on the manufacturer’s label inside the driver’s side door jamb. The business-use rule still applies: the vehicle has to be used more than 50% for business, and only the business-use portion is deductible.¹

Business Use Has to Be Tracked

Owning the vehicle through your business doesn’t automatically make every mile deductible. The IRS wants business use separated from personal use, and the documentation standard is specific. You need a contemporaneous log recording the date of each trip, the destination, and the business purpose.¹ Contemporaneous means recorded at or near the time of the trip. Reconstructing a year of driving at tax time is exactly the kind of record the IRS rejects during audits.

The 50% business-use threshold is a hard line. If business use drops to 50% or below, you lose eligibility for Section 179 and may have to recapture (pay back) excess depreciation from prior years.¹ Owners who write off a vehicle aggressively in year one and then let personal use creep up get caught by this.

When a business-owned vehicle is available for an employee’s personal use, the value of that personal use is a taxable fringe benefit that has to be reported in the employee’s income.¹ Skipping this reporting doesn’t save anything; it just creates audit exposure that can wipe out the business’s vehicle deductions entirely.

Liability Protection, and How to Keep It

Titling a vehicle under a business entity puts a liability buffer between the vehicle and your personal assets. If an employee causes an accident in a company car while doing work-related tasks, the business is typically liable under vicarious liability, but your home, savings, and other personal assets stay protected as long as the entity is properly maintained.

That protection is easy to lose. Courts can pierce the corporate veil and hold you personally liable when the entity is treated as an extension of the owner rather than a real business. Common triggers include heavy personal use of the business vehicle without tracking or reporting it, paying personal expenses out of the company account, and skipping basic formalities like annual state filings and separate bank accounts. Keep business funds strictly to legitimate business expenses, and document any owner distributions.

Leasing Instead of Buying

Leasing through the business is an alternative that skips the upfront capital outlay. Monthly lease payments are deductible for the business-use portion, and there’s no depreciation calculation or recapture at the end. You don’t build equity, you can’t claim Section 179 or bonus depreciation, and you’re stuck with mileage limits.

For expensive passenger cars, leasing sometimes produces better annual deductions than buying, because the luxury auto caps hold purchase write-offs to small annual amounts. For vehicles over 6,000 pounds that qualify for full first-year expensing, buying almost always wins on the tax math. One wrinkle: if the leased vehicle’s fair market value exceeds $62,000, the IRS requires you to reduce your lease deduction by an annual “lease inclusion amount,” which functions as the leasing equivalent of the luxury auto caps.²

What Happens When You Sell

When the business later sells a vehicle it has depreciated, the IRS requires depreciation recapture. The portion of your gain attributable to depreciation you previously claimed is taxed as ordinary income rather than at the lower capital gains rate. The ordinary income portion equals the lesser of the total depreciation claimed (or that you were entitled to claim) or the gain on the sale.⁵ If you took a large Section 179 or bonus depreciation deduction in year one, expect a substantial recapture bill later. That’s not a reason to skip the deduction, but it’s a reason to plan for the tax when you sell.

1
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
2
Internal Revenue Service. Rev. Proc. 2026-15
3
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
4
Internal Revenue Service. Instructions for Form 4562 (2025) – Depreciation
5
Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets