Dealers, drivers riding high on SUV tax loophole Washington Post WASHINGTON -- When Congress this year decided to allow small-business owners, doctors, lawyers and real estate salespeople to deduct up to $100,000 from their taxable income for the purchase of luxury SUVs, Texas car dealer Jerry Reynolds could hardly believe his good fortune. "It's a loophole," his ads proclaim, "and this weekend, we can show you how to make that loophole big enough to drive a fleet of trucks and sport utility vehicles through it!" The "SUV loophole" once seemed to be just a quirk in the tax code -- deplored by environmental activists but ignored by most everyone else. Now it is shaping up to be a marketing bonanza for financial planners, accountants and auto dealers eager to snap up commissions and drive up sales of heavy vehicles, ranging from workhorse Ford F-250 pickup trucks to elite Hummer H2s, BMW X5s and Mercedes-Benz ML55s. A similar tax break, in fact, is long-standing, although more limited. Since 1997, anyone deemed to be a small-business owner for tax purposes could write off some amount of equipment purchases each year -- up to $18,000 worth that first year and up to $25,000 in 2003. Since 1984, the Internal Revenue Service, thinking more about Chevy Silverado pickups than Cadillac Escalades, has considered vehicles that weigh more than 6,000 pounds to be deductible business equipment. When lawmakers began writing this year's $350 billion tax cut plan, they looked for ways to help the economy by encouraging small businesses to invest in new equipment, which could include computers, rotary saws or photocopiers. Congress raised the maximum annual value of the deduction to $100,000, through 2005. At the time, environmentalists implored tax writers to disqualify SUVs, but lawmakers declined. With the top business tax rate at 35 percent, Washington effectively cut $18,900 from the price of a $54,000 Escalade, bringing its cost more in line with an Oldsmobile Aurora sedan. The windfall is starting to get notice. To get the full write-off, the vehicle is supposed to be used full time for business purposes. As long as it is used more than half the time for business purposes, its owner can deduct some of its purchase price -- say, 75 percent for a Chevy Suburban used 75 percent of the time for business. "For the rest of us mere mortals, it's just something else to be annoyed at," said Ric Edelman, chairman of Edelman Financial Services in Fairfax, Va. So many new models are just over 6,000 pounds that Reynolds suspects that automakers have their eyes on the tax code. A 2003 two-wheel-drive Dodge Durango weighs 6,050 pounds. The Senate Finance Committee plugged the loophole in a little-noticed provision in a broader corporate tax bill that it approved last month. By raising the weight limit to 14,000 pounds, enough to disqualify even the gargantuan Hummer H1, the committee figured it would save the Treasury nearly $1.3 billion over 10 years. But that bill is far from passing the full Senate, and the House Ways and Means Committee has not considered a comparable measure. Warning of "a move afoot in Congress," Bob Trinz, a senior tax analyst at RIA, advises in a news release, "Now may be the time to act if you're interested in the convenience, versatility and tax breaks that heavy SUVs offer." --- now you too can add to our already polluted city and get a tax break to do it!
writting off a legit business car I have no problem with changing to write-off to allow people to buy Escalades is a little strange, dontcha think? 18K to 100k ? that is a big difference
If it's being used for business, no, absolutely its not. Now if people are LYING to get to this loophole, that is a problem. Encourging small businesses is great.
If people are using it for business purposes, who cares what kind of automobile it is? I know a doctor who used to drive twice a week from Lubbock, Texas to Hobbs, New Mexico, because there evidently wasn't anyone in his field practicing in Hobbs. I see no problem with him making use of something like this. Should it be strictly enforced? Sure. No one is saying it's okay for people to use this to buy a third Tahoe just to drive up to Lake Tahoe on the weekends. I'm just glad people are buying vehicles. Maybe if enough doctors, lawyers, etc. buy these expensive SUV's, the automobile manufacturers won't have to cut production anymore. I haven't really looked into it, but it seems to me that the automobile industry has been hurting the last year or so. I'm just basing that on all the 0.0% offers (even for the full term of the loan), and the fact that there's a car salesman who calls me periodically, even though I've turned him down countless times and told him I have no intention of buying a car from him.
Do not kill the golden goose for all those AMERICAN autoworkers building those large SUVs you hate so much. Most of the industry profits are from those bloated, overweight station wagons. By getting rid of that so-called "loophole" that you want to close so quickly and add more money to spent wastefully in Washington, you will hurt the domestic auto industry.
bamaslammer is on board with tax-cuts for luxury car buyers good to know who is next to voice their support for the government giving tax-breaks for people to buy fuel inefficient polluting luxury rides?
I just wisk the break was on fuel-inefficient polluting luxury rides that I could see over/around/through while driving my normal sized car.
You understand that the main difference between this law for small businesses and the standard code for large ones is that the small ones can expense them and the others must depreciate them over 5 years (but with a big depreciation in year one, e.g. for a $30k car they can depreciate about $13k in year one). So it's just a time-value of money issue from the tax perspective. If you have a problem with the SUVs overall, then you have to argue against any company getting to purchase an SUV for business use. That just doesn't sound realistic, does it? Why not force the manufacturers to make more efficient vehicles?
And FWIW, Section 179 is awesome. That has to be the most helpful code ever created for small business. Cash flow is the key, and this helps immensely.
I understand and yes, making the manufascturers produce more fuel efficient cars would be awsome, but that will take time to overcome powerful lobby groups.. but that is a whole other topic of discussion...the Selfishness of SUVs
And FWIW, Section 179 is awesome. That has to be the most helpful code ever created for small business. Cash flow is the key, and this helps immensely. Agreed - this is actually the definition of "economic stimulous". Raising the 179 deduction costs the government very, very little and dumps tons of funds into the economy. This whole SUV thing is a bit of a distortion of the reality of it. Today, you buy a $100k SUV and you can get a $100 tax writeoff this year. In the past, you buy a $100K SUV and you get a $20k tax writeoff for each of 5 years.
Hey now, don't lump us all in one tidy little package. I own one, use it all the time on roadies, camping trips, jaunts hunting & to the ranch, times when I need the cargo space & 4WD. How's that selfish? I would hope you're directing your comments toward owners of those "luxury SUVs" (cough, TJ, cough) whose tires have touched nothing but concrete.
SUVs are a danger to everyone on the road who can't afford to buy an SUV. But they're sure fashionable. Affluent-looking people drive SUVs, from what I can tell, and affluent-looking people definitely have the right and the privilege to endanger everyone who isn't as affluent. It's like natural selection at work on the environment of our public roads. (On the subject of "public" roads, it's only proper that those who look like they pay the most taxes should also get to occupy the most space and have the most freedom to drive how they choose on the "public" roads, don't you think?) (Relating to this thread, it's also just common sense that affluent people should be allowed to profit in some measure from a tax loophole as a reward for their affluence, whether they were born into it or not.) If the natural selection lasts long enough, there is a possibility that everyone born in succeeding generations will be affluent! Fantastic!
I may be missing something, but in what way did my words differ from yours? In essence, I was saying the same thing. 1. I don't hate SUV's. 2. I'm not concerned about closing this loophole. I basically said, "What's the big deal? I'm glad someone is buying cars." Is that not the same point you made? I think it's great if people can get a write off for their new Hummer. I do, however, believe that people need to be using it for business if it's going to be considered "deductible business equipment." That just makes sense to me.
Guess I misinterpreted your statement about that. I don't hate them either. My dad just bought a Nissan Armada.....I can hardly wait to see what that beastie can do.
There are justifiable reasons for everything, including buying air-clogging vehicles. I'm not removing myself from the equation -- I just bought a car that gets 30mpg instead of a 50mpg hybrid. I rationalized it for selfish reasons, just as people who buy 10mpg Canyoneros instead of more reasonable wagons. But we need to be careful to remember that air pollution doesn't decrease on intentions. Air pollution from an SUV that often goes off-roading causes just as much asthma as an SUV that never leaves asphalt. And let's not forget the automakers, who refuse to improve fuel economy on vehicles, though the technology has existed for 20 years. We have to demand more from our vehicles, and not just horsepower. We're all responsible for air quality, and until we start making decisions based on the greater good (instead of how cool a vehicle is, or how many kids we can cart to soccer), environmental quality will continue to deteriorate. And our kids will have to foot the bill.
excellent points I would add that another effect of America's SUV lovefest is that it is increasing our need for foreign oil. Driving the kids all over Houston eats up a lot more gas in a SUV than it would in a sedan or MiniVan.
