More SUV Tax Deduction Info...

SUV sales climb on tax loophole

By Jim Hopkins, USA TODAY

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SAN FRANCISCO — A tax loophole big enough to drive a $90,000 sport-utility vehicle through is working magic on SUV sales.
Small-business owners are swamping dealers with orders for Porsche Cayennes, Cadillac Escalades and other pricey SUVs as Congress tries to close the loophole driving such sales.

Dealers sold more than 101,000 full-size and luxury SUVs last month — a 51% jump from a year ago in what's usually a slow month, says researcher Power Information Network. Figures aren't kept on the number sold to businesses.

Many sales were spurred by a small-business tax benefit in the $350 billion tax cut that President Bush signed last May, dealers say. Before the cut, many vehicles weren't eligible for a business tax deduction.

Business owners such as Dean Parker in Mobile, Ala., discovered the benefit applied to SUVs weighing more than 6,000 pounds. Parker, who owns a paging service, spent $108,000 on a Cayenne and a Hummer H2 in June. He uses them for sales and service calls. Tax savings: $37,800.
 

The benefit raised to $100,000, from $25,000, the amount small firms can write off annually for investments in machinery and other big-ticket items. The increase was meant to spark business investment and job growth. But critics, including Sen. Don Nickles, R-Okla., say it's a costly giveaway that's ripe for abuse. Nickles is on the Finance Committee, which failed in an attempt to slash the benefit in November.

A tax bill awaiting action in the Senate seeks a cut again. A vote could come later this month or in March. Bush, amid pressure to trim the federal deficit, kept the benefit in his 2005 budget proposal last week. Whatever the outcome, it has become a gold mine for:

•Buyers. Bob Marra and his fiancée plan to buy a $57,000 Escalade for their real estate and publishing companies near Palm Springs, Calif., in the next two weeks. Tax savings, after an allowance for personal use: $17,556.

Melody Warren, CEO of Transportation Logistics Systems, bought a Lexus GX 470 for $48,000 on Dec. 27, racing to close the deal by year's end so she could get a 2003 write-off. She'll use it for sales calls at the freight management company in Kansas City, Mo.

Dealers sold nearly 164,000 luxury SUVs in December, a 22% jump from 2002, says Power Information.

•Sellers. Hendrick Porsche in Charlotte sold six Cayennes in January and December, priced at up to $90,000 each, to business owners taking advantage of the benefit. That was a quarter of all the Porsches sold in the period, says new car manager Ed Keady. "Six Porsches anytime is fairly significant," he says.
 

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