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SUV Tax Break – SUV Tax Break Basics

Posted on Monday, December 8th, 2003 by

SUV Tax Break gaining momentum

Vicki Greenwood checked with her accountant and then cut a deal for a brand new H2 Hummer, taking advantage of the so-called SUV tax loophole that’s driving a surge in year-end sales of heavy weight vehicles.

Vicki Greenwood checked with her accountant and then cut a deal for a brand new H2 Hummer, taking advantage of the so-called SUV tax loophole that’s driving a surge in year-end sales of heavy weight vehicles.

“Last year I paid Uncle Sam too much money and I decided I wasn’t going to pay him as much this year,” Greenwood said.

Greenwood, who is the owner of Greenwood Academy day care center, said the purchase will shave more than $14,000 from her taxes this year.

As part of a $350 billion economic stimulus package passed in May, Congress quadrupled to $100,000 the amount business owners can deduct in the first year when they purchase a qualifying vehicle.

The quirk is, the vehicle has to weigh at least 6,000 pounds GVWR.

But almost every pickup and most SUVs meet that threshold, said John Wendt, a sales manager at JC Billion in Bozeman.

Self-employed folks like real estate agents, consultants, doctors and lawyers all are finding advantage in the tax break.

“We’ve had quite a number of people buying expensive SUVs and pickups,” Wendt said. “They’ve been advised by their accountants to do that.”

Wendt said the sales staff doesn’t suggest people buy an SUV for the tax break.

“Obviously we’re not tax accountants,” Wendt said.

But sales people don’t have to bring it up, he said.┬áPeople are showing up armed with the tax information and ready to buy big SUVs like the GMC Yukon, he said.

“It’s pretty incredible that you can write off what you can,” Wendt said.

But Elmer Johnson, a Bozeman CPA, comes across as a bit of a curmudgeon on the issue.

“I’m more conservative,” Johnson said. “But you can buy it, buy an SUV for Christmas. You could do it, but it’s not all fun and games.”

Tax law is complicated, Johnson cautions. For example, if one fully depreciates a vehicle and then sells it next year, the tax deduction is all recaptured.

“It’s not a windfall,” Johnson said. “I tell people if you need the piece of equipment and it can make you some money buy it. But if you’re just buying it so you can get a tax deduction,” it probably isn’t worth it.

The tax break has angered environmentalists, who say it offers a perverse incentive for more people to buy gas guzzlers instead of more fuel-efficient cars.

Taxpayers for Common Sense is urging repeal of the deduction And the Senate Finance Committee in October approved changes to limit the deduction, such as increasing the qualifying vehicle weight to 14,000 pounds.

But for now, business owners like Greenwood say, it’s too good to pass up.

“We do a lot of field trips so I’ll use it for transportation,” Greenwood said of the new Hummer.

And it’s fun besides.

“I figured I might as well enjoy something and not pay Uncle Sam as much,” she said. “This vehicle is pretty awesome.”

 

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