The new law won't wipe out
all tax breaks for all business buyers of SUVs. And it won't change
anything for businesspeople driving trucks weighing more than 6,000
pounds fully loaded.
But it will scale back some of the biggest deductions that riled the
public last December when business owners rushed to buy $110,000 Hummer
H1s and deduct almost all of the cost. When the bill is signed, that
deduction will be about $76,000.
"It's kind of a half-measure," said Paul Gada, a senior small-business
tax analyst. "They didn't really get rid of it."
And until the law changes, those big SUVs are still fair game, although
it costs much more now to fill them up.
"If you've been procrastinating, you have an opportunity to go out and
get your gas-guzzling SUV," said Gada, who works for financial
researcher CCH Inc., based in Riverwood, Ill.
The new law will expire at the end of 2007.
Some Valley dealers said sales of qualifying vehicles, which included
the Dodge Durango, Ford Excursion, Toyota Land Cruiser and 37 others,
spiked by as much as 40 percent late last year, spurred in part by tax
accountants advising their business clients and car dealers promoting
the tax break. Tempe dealer Chapman Chevrolet Isuzu still promotes the
tax break online.
The law's original intent was to help farmers and other small-business
owners hauling cargo. Qualifying business owners had to buy vehicles
that weighed more than 6,000 pounds fully loaded, but the law didn't
specify what type of vehicle.
More businesspeople began taking the tax break for SUVs, which have
grown larger in recent years.
Arizona auto dealers reported doctors, lawyers and real estate agents
snapping up the gas guzzlers to snag the deal.
Take a $70,000 Cadillac Escalade. Under the current law, buyers can
deduct the SUV's full cost on their income taxes in the first year.
That lowers their tax bill by about $23,000, depending on the tax
bracket, which equals a 33 percent discount on the vehicle.
Under the new law, Escalade buyers can deduct only $25,000 of the
$70,000. Like the old law, the new one allows for bonus depreciation,
which equals a $17,000 tax-bill cut, or a 24 percent discount on the
SUV.
Keith Ashdown, spokesman for the Washington, D.C.-based Taxpayers for
Common Sense, said his bipartisan organization opposed the original law
but favors the new one.
"Its intent was for hauling hogs, not to purchase Hummers," Ashdown
said. "Our feeling was that it's a good, common-sense approach."
The new law won't affect heavy-duty pickup trucks favored by many
Arizona business owners, Phoenix tax attorney Bob Kamman said. Trucks
that weigh more than 6,000 pounds fully loaded will follow the current
law, with a first-year deduction cap of $100,000.
"A lot of people in Arizona who took advantage of this are contractors
and builders using pickup trucks, the urban cowboys," Kamman said.
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