What do you know about the SUV tax loophole?

[floridafam]

Anyone out there going to use it?

This has been all over TV and newspaper the past few weeks.

Thanks in advance for info.

 

[fireplug]

I would like to know to. My DW says I can buy an Escalade if it for real.

Steve

 

[floridafam]

It is for real.

I just haven't talked to anyone who actually intends to use it.

Check out this link.

It lists the vehicles that are a part of this.

http://www.taxpayer.net/TCS/whitepapers/SUVtaxbreak.htm

 

[Bichon Barb]

I didn't read the link, but I believe it is for SUV's that weigh over 6,000 lbs. That's a mighty big SUV.

 

[Dan Murphy]

Hope they close this one soon. We need that, more behemoths, tax driven in addition to the ' mine's bigger than yours' mentality.

 

[ToyStory Fan]

Originally posted by Bichon Barb
I didn't read the link, but I believe it is for SUV's that weigh over 6,000 lbs. That's a mighty big SUV.

It is not the weight that needs to be over 6,000 lbs it is the Gross Vehicle Weight Rating (GVWR) which is the weight of the vehicle plus occupants (using an std. average weight per person), plus cargo. I t must be 6,001 or higher, this 1 lb. has actually caused ALOT of grief for some Lexus GX470 owners because they were planning on taking the tax break, but a recall later changed the GVWR from 6,100 to 6,000.

This ONLY gives you a tax break if the vehicle is purchased as your "company-car" and you are self-employed/own your own business. The way it works is that you can take I think it is up to 50% of the depreciation in the first year (so on a 52K SUV) you get a depreciation expense for tax purposes to offset your income of 26k which depending on your tax bracket translates to approx 10k of REAL cash tax savings/benefit.

Not to start a flame war, but what's the "dig" on the big suvs, some people have a real need for them, big families and such. And if anyone wants to play the "green" card many of the large SUV's while they burn more gas their emmissions are better controlled than some of the most fuel economy minded cars around.

 

[Bichon Barb]

I've always thought this would be a good topic for the debate board. I drive a large SUV. I have no guilt for doing so. I tow an RV and live in one of the snowiest cities in the country. But it's not up to me to judge who is SUV-worthy and who is not.

Just because you drive a 4 or 6 cylinder car, doesn't necessarily mean that you are more environment friendly. For example, when we bought our home, we made sure it was fairly close to our office (7 miles). There are many people who drive 3 or 4 or more times that distance to get to work. Or you may drive a sedan, yet live in a large home. Take that famous SUV basher, Barbara Streisand for example...

 

[floridafam]

Do you know if you can take this credit if you LEASE the vehicle?

 

[mudnuri]

I find the tax loophole quite fascinating....

My Chevrolet Duramax 2500 Crew Cab, is not listed, however the GMC Sierra Denali is...hmmmmm I know my Crew Cab weighs more than that Denali does...

I also agree with everyone who purchases a SUV...be it a midsize or a large one. We bought a Suburban back in 99, have always had Crew Cab pick up trucks, and I also own an 1986 full size Blazer, that sits up 7" higher than stock with 35" tires. Is it eco friendly.. HA...was it ever, no, will it ever be? no..

My Duramax burns diesel fuel..is that better than gas? I really don't care, thats not why I bought it. I can tell you that my 2003 Grand Am SE2 gets an average of 15-18 mpg and my Duramax, that has a GVW of over 6000 lbs gets an average of 20-22 mpg...big difference there!...


I love my big trucks, and Ill keep buying them with or without a tax loophole...which by the way- DH's company owns the Duramax, so we could theoretically take the credit.(if I figure out why its not listed..but it could be cause its a diesel)

Brandy

 

[ToyStory Fan]

Originally posted by floridafam
Do you know if you can take this credit if you LEASE the vehicle?

I don't think so. If you lease you are most likely expensing the entire amount of the lease, and tracking the actual business use of the ehicle vs. personal. You can then only run thru the expense portion related to the business use. The tax credit is meant to equate to the leasing advantage because the lease payment is really just the depreciation on the vehicle anyway.

BTW...yes I'm an accountant.

 

[Lanshark]

Dan,

This loophole is for small business and meant for those who transport people or equipment. It seems to make sense in these cases. Those of us who are self employed pay at least 7.5% more taxes just for FICA (social security) alone. It's nice to finally have some break. I have not taken advantage of it yet. I will be talking to my accountant to see if I qualify.

 

[floridafam]

My Dad will also be talking to his accountant on Monday. He is self-employed and was told he qualified for the credit.

I didn't think you could use it on a lease but I'm just going to make sure.

The bad thing is the payments are much lower with the lease but with the credit it might not really matter that much and work out better in the long run.

Thanks for all of the information.

 

[Dan Murphy]

Not sure why I even looked back on this, but glad I did. As the OP referenced the title of this thread, '........loophole', it is the 'loophole' effect that taints the direction of what are originally designed as 'tax preferences'. As is referenced in the link provided by floridafam (http://www.taxpayer.net/TCS/whitepapers/SUVtaxbreak.htm), a 'tax preference' is created to give direction, typically for the greater good. Periodically, as here, the wording of a 'preference' inadvertently creates a 'loophole' effect along with it, again, as is very well described in the article here linked. It was designed to promote the purchase of equipment type vehicles for farmers and businesses, not the gigantic luxury SUV's that auto manufactures churn out to satisfy the consumer's desire of that aforementioned, by me, 'mine's bigger than yours' mentality. Vehicles like BMW X5, Cadillac Escalade ESV, Toyota Land Cruiser, Mercedes M-Class, Lincoln Navigator, and the like, typically do not fit the definition of the 'intended tax-preference, but rather the 'unintended tax-loophole. As always, JMO.

 

[bat4less]

we own 2 separate biz's and have used the ' loophole ' for both of them in the past 2 months. works out very nicely on the tax front.

we also have 3 kids and one on the way , so they help out in that manner also

we lease to own, trade every 2 years anyway, and it works for that manner also

mike

 

[mom2boys]

My Chevrolet Duramax 2500 Crew Cab, is not listed, however the GMC Sierra Denali is...hmmmmm I know my Crew Cab weighs more than that Denali does...

The weight is meant to exclude large "passenger" vehicles from the luxury automobile depreciation limits. Light trucks do not fall under the IRS' definition of luxury automobiles (and therefore do not have limited depreciation).

The depreciation only applies to the business portion attributable to the business usage of the vehicle. If the vehicle is 75% business/25% personal then only 75% of the value is depreciable.
The "bonus" depreciation is in addition to the regular depreciation. But it is being borrowed against future depreciation. If you are considering taking advantage of the bonus depreciation, you might want to project the tax effect over the next several years. It will result in lower depreciation in future years potentially resulting in higher taxable income in future years. The bonus depreciation applies to all captial asset acquisitions - not just SUVs.

 

[Banzai]

 

[Planogirl]

Thanks so much Dan for pointing out some things.

I have no problem with SUV's. I have a problem with the car companies not making them as economical as possible. (And they can make them more economical.) I also don't like the government pushing bigger vehicles when many small businesses can do well with much smaller SUV's and even small trucks.

Gas resources will run out. That's just the way it is.

 

[mudnuri]

My Chevrolet Duramax 2500 Crew Cab, is not listed, however the GMC Sierra Denali is...hmmmmm I know my Crew Cab weighs more than that Denali does...
--------------------------------------------------------------------------------

The weight is meant to exclude large "passenger" vehicles from the luxury automobile depreciation limits. Light trucks do not fall under the IRS' definition of luxury automobiles (and therefore do not have limited depreciation).


That doesnt make sense- the Denali and my truck, are identical...the difference is in the badging. If the Sierra is listed, then the Silverado should be listed.

My Crew cab fits just as many passengers as a Tahoe or Yukon does...

I'm gonna call the accountant Monday.

Brandy