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Did you see Bush's proposed tax changes?

Discussion in 'Business Operations' started by lasher66, Jan 21, 2003.

  1. lasher66

    lasher66 LawnSite Senior Member
    Posts: 395

    Bush has proposed and its not definite yet but you can deduct up to $75K for buying a new SUV or Pickup in a single year. This means we will be able to deduct the cost of a new truck for your business in one year instead of depreciating it over several years. I guess this is for vehicles with a 6000 lb weight rating. That means major tax break for the current year. Just make sure if this new tax law passes , that you realize the following year you wont have any vehicle depreciation to deduct for that vehicle. Its similar to the Section 179 but they are nearly tripling the amount. Hope this passes though, that would be great.

  2. Ken's Lawn Service

    Ken's Lawn Service LawnSite Member
    from Georgia
    Posts: 21

    Actually it has been around for a while. This was found on the following web address: http://clarkhoward.com/topics/suv_taxbreak.html

    A tax break for truckers...but you must be self-employed!

    There is a loophole in the federal law right now that gives SUV and truck owners a great tax break. To give you some background, many years ago rules were written into law prohibiting business owners from buying luxury vehicles and then writing them off on their taxes. Basically, these people were buying luxury cars and using special depreciation rules to get taxpayers to pay for their transportation. That rule was done away with about 20 years ago, but one exception in it was left alone.

    Vehicles designed for construction or farm use were exempt. When the rule was developed, the idea of buying a luxury sport utility vehicle just didn’t exist. Nobody was interested. On top of the exempted provision, Congress passed some new tax breaks after September 11 to encourage businesses to build new factories and buy new equipment. But a provision in those breaks also makes it possible for people who own their own business or who are self-employed to get an SUV for next to nothing.

    One man featured in the Detroit News bought a $47,000 Ford Excursion, but he was able to deduct $32,000 of that amount. If he’d bought a passenger car, he would only be able to write off a small amount. News of this break is spreading and people are jumping on the bandwagon. If you’d like to see the list of vehicles that qualify, go to The Detroit News.

    Not all SUVs qualify, so check the list and talk to your CPA first. Clark doesn't think the law should be manipulated this way. It's going to end up costing the taxpayers lots of money, and it will go away in due time. So, if you want to take advantage of it, you better hurry.

    Attached Files:

  3. Ken's Lawn Service

    Ken's Lawn Service LawnSite Member
    from Georgia
    Posts: 21

    SUV, truck owners get a big tax break

    Loophole allows hefty write-off for vehicles

    By Jeff Plungis / Detroit News Washington Bureau

    Eligible vehicles

    Here are the 38 light truck models that qualify for an extra $24,000 accelerated depreciation tax break:
    BMW X5
    Cadillac Escalade
    Chevy Astro
    Chevy Avalanche
    Chevy Express
    Chevy Silverado
    Chevy Suburban
    Chevy Tahoe
    Dodge Durango
    Dodge Ram Van
    Dodge Ram Maxi Van
    Dodge Ram Wagon
    Dodge Ram 1500
    Dodge Ram 2500
    Dodge Ram 3500
    Ford Excursion
    Ford Expedition
    Ford Econoline E-150
    Ford Econoline E-250
    Ford Econoline E-350
    Ford F-150
    Ford F-250
    Ford F-350
    GMC Yukon
    GMC Safari
    GMC Savana
    GMC Sierra
    GMC Sierra Denali
    Land Rover Discovery
    Land Rover Range Rover
    Lincoln Blackwood
    Lincoln Navigator
    Mercedes ML 320
    Mercedes ML 500
    Mercedes ML55 AMG
    Toyota Land Cruiser
    Toyota Sequoia
    Toyota Tundra

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    WASHINGTON -- Karl Wizinsky wasn't thinking about buying a new vehicle, and certainly not a big SUV. So why is there a brand-new $47,000 Ford Excursion sitting in his driveway?

    He was able to write off $32,000 of the purchase price as a business expense.

    "We really did it because it was a pretty hefty deduction," said Wizinsky, a health care consultant in Novi.

    At the same time the tax code sanctions $30,000 write-offs for SUVs, prospective purchasers of a fuel-efficient hybrid vehicles qualify for a relatively small $4,000 tax credit.

    A deal to extend similar tax credits to other environmentally friendly vehicles remains stalled in Congress.

    It's all legal, and accountants and auto dealers are beginning to catch on.

    "If it can save the consumer money, it's most likely that the dealer is going to know about it," said Andrew Beck, spokesman for the National Automobile Dealers Association. So far, there is no indication anyone in Congress wants to close the loophole. In fact, even higher depreciation tax breaks are on the table as part of the next round of tax cuts President Bush is planning.

    The SUV tax break is becoming a staple of advice in the accounting world, as small business owners such as Wizinsky are advised on ways to reduce end-of-the-year tax bills.

    The size of the tax break has been growing under a schedule that became law in 1996. That's when Congress changed tax law to encourage business investment.

    The scale of the tax break surprises accountants and tax experts, who feel bound to recommend SUVs and other light trucks to small-business clients.

    "As I understood it, the reason (for the tax break) is to encourage business investment. That's what happened in my case," Wizinsky said.

    At the same time, the tax break seems to contradict other national goals, such as improving vehicle fuel efficiency. A more economical fleet would aid two important national goals: reducing U.S. dependence on foreign oil and cutting greenhouse gasses.

    The total cost of the loophole hasn't been calculated by the government, but Taxpayers for Common Sense, a nonpartisan Washington watchdog group, estimates the SUV tax loophole could cost taxpayers between $840 million and $987 million for every 100,000 vehicles sold to businesses.

    Aileen Roder, the group's program director, questioned whether there is a national need to subsidize sales of the largest light trucks -- given Americans are buying SUVs in record numbers.

    "This is one of the most lucrative breaks in the tax code," Roder said. "We're making it a fiscal no-brainer for businesses to buy giant SUVs."

    To get an idea of the scale of the SUV tax break, a credit aimed at making it easier for small businesses to comply with the Americans with Disabilities Act costs $525 million per 100,000 uses.

    A tax credit to reimburse teachers for classroom supplies annually costs the treasury $250 million per 100,000 uses.

    And a provision allowing taxpayers to put up to $3,000 of tax-free earnings per year in private retirement accounts costs about $90 million per 100,000 taxpayers, according to Taxpayers for Common Sense.

    There are long-standing limits on deductions to prevent taxpayers from subsidizing luxury-car purchases. But the limits do not apply to 38 light trucks that weigh 6,000 pounds or more, including the Cadillac Escalade, Dodge Durango, Excursion and Lincoln Navigator.

    "We recognized it immediately and started informing people about how to use it," said James Jenkins, an accountant in Southfield. "It's just fabulous. My clients have been drooling."

    Jenkins said five clients have used the loophole so far and five more are considering it. Jenkins even considered using the break, test-driving several SUVs.

    "It makes you think very hard about it," Jenkins said. "But it was a 30 percent larger vehicle than I wanted."

    Here's how the SUV tax break works:

    Suppose a business owner wants to purchase a $45,000 luxury SUV for use in his business. He or she could write off $24,000 of the cost under section 179 of the tax code as accelerated depreciation. Then the buyer could write off additional depreciation of the remaining $21,000 under a five-year schedule -- 20 percent, or $4,200, in the first year.

    That's a total $28,200 tax write-off.

    The balance of the vehicle could be written off over the next five years. A more expensive large vehicle, like a Mercedes E-class SUV, a Range Rover or a BMW X5, would qualify for an even greater tax break.

    The break for trucks got bigger this year under a schedule Congress adopted in 1996 when businesses could claim $17,500 in accelerated depreciation on equipment.

    That lump sum increased to $20,000 last year. It went up to $24,000 this year. Next year and thereafter the deduction will be $25,000.

    In 1996, Congress estimated the five-year cost of the tax break -- for all business equipment -- to be $1.6 billion. But luxury SUVs had barely cracked the market at that time.

    IRS spokesman Bruce Friedland said the agency does not keep data on how much the tax break has cost. According to figures supplied by Autodata, there were 3.8 million of the 6,000-pound light truck models sold in 2001.

    There are no estimates for how many of the vehicles that qualify were sold to businesses or how many businesses that bought vehicles took advantage of the deduction.

    The code is not as generous for luxury cars.

    A business owner wanting to purchase a Lincoln Town Car would have to live with a $7,660 deduction, one-fourth what he might save by buying a Lincoln Navigator. It would take more than 15 years to recoup the entire cost of the car.

    After Sept. 10, 2004, the luxury-car write-off will revert to $3,060.

    Tax experts say the light-truck tax loophole was originally targeted for farmers, so their working pickup trucks would not be treated, for tax purposes, like luxury cars.

    There was no mention of the need to stimulate the luxury truck market in the 1996 tax debate.

    The House of Representatives attempted to make the SUV tax break even more generous as Congress debated an economic stimulus package in March.

    Under the House plan, the cap for accelerated depreciation would have risen from $24,000 to $35,000. That effort died in negotiations with the Senate.

    You can reach Jeff Plungis at (202) 662-7378 or jplungis@detnews.com.
  4. Tony Harrell

    Tony Harrell LawnSite Senior Member
    Posts: 739

    Trucks have been exempt from epa fuel requirements because they need power to haul. Suv's are considered trucks because a lot of people used to haul boats, travel trailers etc. That was back when there were only suburbans, blazers and broncos. Luxury Suv's are a recent developement. The IRS will disallow a business owner that deduction if the unit is used for less than 50% in the business OR if it's simply used to transport the owner to the business. In other words, it has to function as part of the business. There are a ton of ways to get around this and a lot of people probably do. I don't worry about them, I have enough to worry about as it is.
  5. Organix

    Organix LawnSite Member
    Posts: 113

    I wouldn't get too excited. The 32k your saying that you can write off means you would have to owe that much to do any good for one thing. I guess there may be some people that might owe that much. But a write off is not a credit. It just means you won't get taxed on the income you write off. Which is why it's a joke they say rich people pay more taxes.

    So basically whatever the tax is on that 32k for your bracket is what you're saving.. I'm thinking you probably know that, but if you don't NEED to buy a truck, it's not like it's going to be free.

    It's good that they are thinking of raising the ammount you can write off from 25k to 75k but it is not going to help a real small biz person like me, at least not for a while. I wish I could afford to buy 25k in equipment over five years let alone one.

    Another thing about SUV's and trucks, is they are not required to meet the same safty standards. Everyone thinks they are safer because of their size, but on roll over and side impacts, they often don't fair as well. That was the reason they said they did not want to raise cafe standards, because people cared about saftey. LOL. Now they want to give tax breaks for them, sounds like BUSHACO wants to sell more gas to me.
  6. dougaustreim

    dougaustreim LawnSite Senior Member
    Posts: 488

    There is a big misconception about spending money to save on taxes. Suppose you buy some euipment for $10,000 that you don't need just to save taxes. If youre in a 30% tax break which is higher than a lot of folks. You would save $3000.00 in taxes. The equipment still cost you $7000 out of your own pocket. If you have to finance it, which many people do, the interest charges will eat up a lot of the tax savings, and what savings is left will be gone with the immediate depreciation in value on new equipment. Unless that invenstment can immediately turn in to increased profits, you will go backwards.


    Austreim Landscaping

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