Hummer tax break gets hammered [View All]

[godai]

I've heard off and on about this ridiculous tax credit which has promoted 6000 lb SUV gas guzzler sales over the past 5 years or so. Seems it created 'free SUVs' for those qualifying but we all ended up paying for these tax credits.
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Under the Jobs and Growth Act of 2003, Congress raised the deduction ceiling for these heavy-class vehicles from $25,000 to $100,000, bumped the "bonus deduction" from 30 percent to 50 percent, and left in place the accelerated five-year depreciation schedule. This, in effect, made virtually all three-ton, business-use SUVs fully deductible in the first year. More than 50 vehicles qualified for the tax break.

Sure enough, tax-savvy self-employed professionals such as doctors, dentists and yes, accountants, connected the weight of today's luxury SUVs with the obscure tax loophole and started sporting heavy iron in order to deduct the entire purchase price in the first year. Which might explain why traffic lanes have seemed a little narrower lately.

Congress reversed itself last fall with passage of the American Jobs Creation Act of 2004 and cinched back the SUV loophole from $100,000 to $25,000 while retaining both the 50-percent bonus deduction and the five-year depreciation schedule. The deduction is claimed as a Section 179 expense, meaning you must be in business, filing a Schedule C or corporate tax return, to claim it.

Will the lower expense ceiling stop the heavy-metal stampede? Not likely, says Ronnie Windham, a certified public accountant in Oxford, Miss.

"I don't think it's going to affect people's buying habits. Most people buying SUVs are paying $40,000 or $50,000, so by the time you take the 50 percent bonus deduction and the $25,000 depreciation expense, most of them are still going to write off the full amount."

Windham notes that SUVs also enjoy what is called a maker's depreciation. "There's no dollar limit on the amount you take off each year, it's just based on what the vehicle cost. It actually takes you about six years to fully write off a five-year vehicle," he says.



http://www.bankrate.com/brm/itax/biz_tips/20030403a1.asp