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To bad we just missed by a little for the Tax break!!!


Bush Proposal May Cut Tax on S.U.V.'s for Business
By DANNY HAKIM


DETROIT, Jan. 20 — The Bush administration's economic plan would increase by 50 percent or more the deductions that small-business owners can take right away on the biggest sport utility vehicles and pickups.

The plan would mean small businesses could immediately deduct the entire price of S.U.V.'s like the Hummer H2, the Lincoln Navigator and the Toyota Land Cruiser, even if the vehicles were loaded with every available option. Or a business owner, taking full advantage, could buy a BMW X5 sport utility vehicle for a few hundred dollars more than a Pontiac Bonneville sedan, after the immediate tax deductions were factored in.

Tax experts and environmentalists say the plan would provide incentives for businesses to choose the biggest gas-guzzling trucks because it takes several years to depreciate the cost of passenger cars and smaller sport utility vehicles. The ramifications of the Bush plan on S.U.V. buyers were reported today in The Detroit News.

The potential lift for sales of big S.U.V.'s comes amid rising tension in the Middle East and increasing criticism of S.U.V.'s from environmentalists and regulators.

But a top budget official said today that the administration might be open to changes in the tax code that would bring cars more in line with big trucks.

"We have an open mind about whether the deduction for cars needs to be refined," said Dr. John Graham, the administrator of the Office of Information and Regulatory Affairs in the Office of Management and Budget.

The tax code now caps deductions for most automobiles. But the largest vehicles — those that weigh more than 6,000 pounds fully loaded — are exempt because the relevant portion of the code was written in the 1980's, before the rise of the sport utility vehicle, and was intended to exempt big pickups needed on work sites. Now the tax incentives also give business owners not involved in hauling — doctors, real estate agents, accountants — more incentive to buy the biggest S.U.V.'s instead of smaller ones, or cars.

The proposal "makes a glitch in the tax code much worse and it benefits rich businessmen who want to buy massive S.U.V.'s," said Aileen Roder, program director for Taxpayers for Common Sense. "In essence we're buying these vehicles for these businesses."

But the administration says that greater business deductions will be a potent economic stimulant.

"Many small businesses have genuine needs for large vans, pickups and S.U.V.'s, whether it be for a farm, sales or industrial application," Dr. Graham said. "An updated tax deduction for small businesses is certainly needed."

Consider the Hummer H1 as an example of the new deduction. It is one of the largest and most expensive S.U.V.'s, with a base sticker price of $102,581, including destination charge. Under the Bush plan, small-business owners could use all of an annual $75,000 capital equipment deduction toward the purchase; the current equipment deduction allowance is just $25,000.

That is in addition to thousands of dollars in other deductions. Under existing rules, a business could deduct 30 percent from the base price left after the capital equipment deduction, a benefit put in place as part of a post-Sept. 11 stimulus package. In the case of the H1, that would be a further deduction of $8,274.

Finally, 20 percent could be deducted from what is left, part of the business deductions available for automobiles. For the H1, that would be $3,861 more in deductions.

The total would be more than $87,000 in deductions, or about $33,500 in savings in federal taxes alone for buyers in the highest bracket. Under current rules, just less than $60,000 could be deducted.

Deals for cars and small sport utility vehicles are much less appealing. Currently, a business can deduct no more than $7,660 for a car in its first year of service, $4,900 in the second year and less in the succeeding years. The Toyota Prius, which uses a fuel-efficient blend of gasoline and electric power, is eligible for an additional $2,000 clean vehicle deduction. That means a business owner could deduct under half of the $20,500 sticker price of the Prius in the first year of purchase, for about $3,700 worth of federal tax savings for those in the highest tax bracket.

David Friedman, an engineer and analyst at the Union of Concerned Scientists, an environmental group, said the increased deduction for big vehicles was "yet another loophole that the government is keeping open that is increasing our oil dependence."

"Before, it was large enough to drive a small S.U.V. through," he added. "Now it's large enough to drive a Hummer through."

Without altering the treatment of cars in the tax code, the Bush plan could run counter to the administration's recent decision to force automakers to improve the fuel economy of S.U.V.'s, pickups and minivans by 7 percent by middecade.

That is probably why the administration is open minded when it comes to reviewing the tax treatment of different kinds of vehicles.

Dr. Graham reiterated today that the administration was also considering further fuel economy measures. S.U.V.'s and pickups that weigh more than 8,500 pounds fully loaded have been exempt from federal fuel regulations. But the administration "is currently investigating whether those rules should be extended to larger light trucks" weighing as much as 10,000 pounds, he said.
 

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Hi Paul123:

___Not that this has been discussed in this forum more than once recently but Kudlow and Cramer on CNBC are speaking of this tax break tonight as well!

___Good Luck

___Wayne R. Gerdes
___Hunt Club Farms Landscaping Ltd.
___[email protected]
 

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Anyone have a handy list of those that do qualify for the > than 6K lbs tax nirvana?
 

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Old news,
that is why ppl buying Ml320 and X5 for Tax reason and they are specially made for tax reason too.

ML320
Gross Vehicle Weight 6283 lbs.

X5 too.



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There is more to than just knowing what the tow rating for a particular vehicle is. For instance, the tow ratings on the left list the Gross Vehicle Weight Rating (GVWR) for those vehicles. This is total allowable weight the towed vehicle can weigh, including all options, equipment and supplies. There may other limitations that we have not covered, such as total of both vehicles. The list provides only tow ratings that are specified by the manufacturer of the particular vehicles
 

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Anti-SUV Mob Will Love This

This has to really bother the anti-SUV nuts. Good!:moon:
 

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First time poster here. I've lurked for a long time but bought an 03 Expedition for the wife rather than the MDX, since she liked it better. Anyway, where the heck did they come up with that list of vehicles? There aren't many vehicles bigger than the Expedition and it's official weight is ONLY 5600 lbs. There is no way that an ML320 is over 6000 lbs. Edmunds lists it at 4800 lbs and the Tahoe at roughly 5300 lbs.

In my not so humble opinion, it seems like the list of vehicles is just a tad too long.
 

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Re: Anti-SUV Mob Will Love This

BaldEagle said:
This has to really bother the anti-SUV nuts. GoodQUOTE]

Wonder what those anti-SUV activists would say about this new tax law as they already accusing SUV drivers being the culprits of fueling terrorism ? :eek:
 

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zman said:
First time poster here. I've lurked for a long time but bought an 03 Expedition for the wife rather than the MDX, since she liked it better. Anyway, where the heck did they come up with that list of vehicles? There aren't many vehicles bigger than the Expedition and it's official weight is ONLY 5600 lbs. There is no way that an ML320 is over 6000 lbs. Edmunds lists it at 4800 lbs and the Tahoe at roughly 5300 lbs.

In my not so humble opinion, it seems like the list of vehicles is just a tad too long.
I believe the 6000 pounds is Gross Vehicle Weight, i.e. car plus people and goodies.
 

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GVWR is the curb weight of the vehicle plus its rated payload capability. The list is correct, and in fact may be missing a few new vehicles.

E.g. the new Toyota 4runner and Lexus GX470 may qualify. And the new Volvo XC90 will qualify in certain trim levels (7-passenger version, I'm not sure if it requires the T6 or does it also apply to the 2.5T).

The MDX's payload capability is quite comparable to the other vehicles, but it is still lighter than most of them, so it does not make the 6,000 lb limit.
 

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Hi guys, long time no see.

any truth to the rumor that this loophole is going to end at the end of this year. I need to buy a daily driver any was thinking of getting a sedan. However, if this option is available, I may have to consider a Sequoia or a Touraeg.
 

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There's been a lot of discussion about changing the rules to specifically exclude SUVs or SUVs without commercial plates. This amendment, however, is not high on Congress' agenda so who knows whether or not they will get rid of it. Several states have changed their rules to disallow the higher deductions for SUVs.

You should take note, however, that the IRS has ways to challenge the deduction if you are ever audited. Very simply stated business deductions must be "ordinary and necessary." You must have some rational reason why you need the large SUV for your business and it must be "ordinary" for your area. I have heard that the IRS auditors will be looking closely at these deductions if you are picked for an audit. (Now your chances of actually getting audited may actually be pretty small, but that's another story.)
 
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