Yet another tax break...

April 25, 2005 8:20 AM

If you owna gas-guzzling SUV, Uncle Sam just might pay for your gas...that is if you use it 100% for business.
posted by C17H19NO3 (41 comments total)

More of the topsy-turvy logic that seems to define our times.
If anything, SUV drivers should have to shoulder a larger percentage of the tax and infrastructure burden for sucking up gas and degrading roads quicker than more fuel-efficient cars.
Unreal.
posted by cows of industry at 8:31 AM on April 25, 2005

In soviet russia, the suv, she drives you! thank you! I love thees country!
posted by stenseng at 8:31 AM on April 25, 2005

at a luxury marina in Burnt Store, Fla

*ahem*
posted by matteo at 8:31 AM on April 25, 2005

I'm shocked at the tax codes that allow business people to expense materials used in conducting their business. There is absolutely no way a roofer should be allowed to write off his pickup truck, just because he's using it exclusively for business.
posted by Keith Talent at 8:45 AM on April 25, 2005

What if you're using your SUV because you run a business that transports sick minority liberal orphans to the hospital for a nominal fee and you didn't want to buy a bus because you felt it used to much gas. Are they still bad then?
posted by bondcliff at 8:46 AM on April 25, 2005

What if you're using your SUV because you run a business that transports sick minority liberal orphans to the hospital for a nominal fee and you didn't want to buy a bus because you felt it used to much gas. Are they still bad then?

Jeez, bait much?
posted by cows of industry at 8:48 AM on April 25, 2005

keith/bondcliff,

yes of course, and realtors/computer programmers/lawyers/doctors should be encouraged to buy giant luxury cars for their "business" travel.
posted by slapshot57 at 8:51 AM on April 25, 2005

Jeez, bait much?

I could have said the same about your post, and I don't even totally disagree with it.
posted by bondcliff at 8:54 AM on April 25, 2005

Except the roofer with his pickup truck wouldn't have a 50-60K tax liability to "write off" by buying one of these vehicles.
Only people making 200K+ would come close to that.
Roofers make aprox. 25-40K a year if they are lucky.
posted by Balisong at 9:00 AM on April 25, 2005

SUV because you run a business that transports
Forty-one domestic and 15 foreign SUVs qualify for this tax break.
Didn't realize vans are now categorized as SUVs.

When it comes to business tax write offs, thought cars are a deductible expense too. Can any CPAs follow up on this article for the real facts here? Recall a neighbor who in the 80’s purchased their cars as business write offs.

Also the news is late since April 15 has passed.
posted by thomcatspike at 9:02 AM on April 25, 2005

Got a problem with the tax code? This is your lucky day! Tell these guys about it. You have until Friday.
posted by ilsa at 9:10 AM on April 25, 2005

What if you're using your SUV because you run a business that transports sick minority liberal orphans to the hospital for a nominal fee and you didn't want to buy a bus because you felt it used to much gas. Are they still bad then?

Then it would probably be a charity, not a business. And you would probably buy a mini-van or a regular van first before an oversized SUV.
posted by destro at 9:11 AM on April 25, 2005

thomcatspike: When it comes to business tax write offs, thought cars are a deductible expense too

RTA: cars are deductible, too, but only normal depreciation. The supposed intention of this law was to make it easier for businesses to make capital investments, such as heavy equipment.

Therefore, if your vehicle meets the supposed 'industrial' criteria, it's deductible at a much higher rate. Originally, 100% of purchase price in one year (vs. 20% with normal depreciation). The law has been tightened now: it's normal depreciation plus up to $25,000 of purchase price in the first year.

The real problem is the criteria. Conveniently for the auto manufacturers who survive on SUV profits, their most profitable vehicles fall into this category. This is why you see insurance agents, real estate agents, etc. driving massive SUVs. (Like the realtor in our neighborhood who drives a Hummer) It's also why you see so many big SUVs wrapped in advertising. The restaurant owner may have trouble legitimately claiming 100% business use, but not if he wraps it in ads for his business, making it into a portable billboard.
posted by tippiedog at 9:12 AM on April 25, 2005

Disclaimer: That last statement (about the ad wrapping) is an assumption.
posted by tippiedog at 9:14 AM on April 25, 2005

a larger percentage of the tax and infrastructure
They do if you look at how much tax you pay at the pump per gallon.
This post is bait, though it did say if. These articles are bait for CPAs since it was not well written. Say bait, because the article makes it seem like every business would qualify. Then pay a tax preparer for the refund but in the end not qualify for it.
posted by thomcatspike at 9:15 AM on April 25, 2005

There is absolutely no way a roofer should be allowed to write off his pickup truck, just because he's using it exclusively for business.

The loophole in question was stupid, and our Congressmen and women probably told all their filthy rich donors to go out and buy a new SUV right now. But the problem here is the rich people who want to avoid taxes and the Congress that lets them. It's not the concept of a business expense deduction. That's the "spend money to make money" philosophy. If people had to pay tax on income that was actually used to cover business costs, they'd never go into business. Most small business have huge losses for the first few years, even with all of these tax breaks.
posted by MrZero at 9:20 AM on April 25, 2005

bondcliff: People who drive SUVs are using more of our fuel resources, and impacting our road infrastructure to a greater degree than smaller vehicles. These are not liberal or conservative assertions, but facts.
But, in your own way, you bring up a good point; there are exceptions. If I need a truck to transport materials to my roofing job, or liberal orphans to the hospital, I ought to be able to claim it as an expense.
If I drive a Porsche SUV because I like to sit higher in traffic on my way to my insurance biz, or a Hummer when I show homes to potential buyers, I should not get a tax break because my SUV is not necessary to do my job.
posted by cows of industry at 9:21 AM on April 25, 2005

buy a mini-van or a regular van first before an oversized SUV.
destro, look at the list of vehicles? I mentioned in an earlier comment, when were vans categorized as SUVs? Do we just assume with SUV posts than check out the facts since they are that hated?

If I drive a Porsche SUV because I like to sit higher in traffic
That's an assuption too.
posted by thomcatspike at 9:26 AM on April 25, 2005

The secondary headline got it right: It's hard to think of a worse formula for wrecking the country.

If you read the article, they are not talking about being able to deduct the gas cost; they are talking about a tax CREDIT for the cost of the gas. That's a big difference. If someone wants one of these gas guzzlers, fine, but I don't want my tax dollars filling their tank.

If I drive a Porsche SUV because I like to sit higher in traffic
That's an assuption too.

Of course it is; that's why it started with "if". Duh.

But if someone did buy a large SUV simply because they like it, I don't think that person should get a tax credit for the gas used. But if they say the vehicle is used 100% for work, they can. That makes no sense.
posted by Doohickie at 9:39 AM on April 25, 2005

I don't really hate SUVs. I'd actually prefer driving a larger vehicle, be it SUV, van or pickup truck, but for the abysmal fuel efficiency. I just feel they've been singled out for tax breaks disproportionately.
Possibly because they're a big money-maker for the auto industry, and possibly because the Big 3 have friends in government.
Or possibly there's another really good reason that I'm not aware of...

"If I drive a Porsche SUV because I like to sit higher in traffic
That's an assumption too."

Eh, more intended as a quasi-humorous example, but okay.
posted by cows of industry at 9:42 AM on April 25, 2005

Let me say that I disagree with the law, I disagreed with the law when it was written, and I disagree with its current incarnation...but, that said, there are some pretty big misunderstandings about the law.

Businesses generally, including unincorporated business, may elect to expense (deduct immediately) the cost of most new business equipment up to a fixed annual amount, instead of deducting the cost through depreciation deductions over a period of years. Under the 2003 Act, expensing was allowed for up to $102,000 of new equipment, except that the $102,000 allowance was reduced dollar for dollar by the amount by which purchases of such equipment exceeded $410,000. These dollar ceilings, originally $100,000 and $400,000 but indexed for inflation to $102,000 and $410,000 for 2004, were to end after 2005, and revert thereafter to $25,000 and $100,000.

The 2004 Act continues the $100,000/$400,000 ceilings, as indexed, through 2006 and 2007. The Act also continues through 2006 and 2007 the rule allowing off-the-shelf software to be expensed, a benefit that would otherwise expire at the end of 2005.

The old rule continues that the expense deduction can’t exceed the year’s taxable income but the excess can be carried over and deducted in later years.

Note: Bonus depreciation, up to 50% of the cost of new equipment that is not expensed, was allowed under the 2003 Act for 2003 and 2004, after which it was scheduled to expire. The 2004 Act does not change that expiration.
SUV Expense Limit

Passenger vehicles qualify for the expensing where used more than 50% for business. Where used 100% for business, they could be expensed up to $102,000 ceiling. The 2004 Act puts a $25,000 per vehicle ceiling on expensing the cost of a “heavy” SUV or Hummer—that is, a passenger highway vehicle weighing more than 6,000 lbs unloaded gross weight and not more than 14,000 lbs gross weight.

The balance of the cost over $25,000 may be depreciated under the usual rules for passenger cars.

The $25,000 ceiling applies to purchases after October 22, 2004.

Note: If used only partly for business (it in any case most be used more the 50% for business), the $25,000 ceiling is reduced proportionately. For example, if used 80% for business, the ceiling is $20,000.

The ceiling on SUVs won’t affect the overall ceiling ($100,000 as indexed, which in 2005 may be $105,000) on the amount that can be expensed. For example, if a business buys a $70,000 SUV and $90,000 of other equipment in 2005, and uses it all 100% for business, it can expense $25,000 of the SUV and $80,000 of other equipment (or less for the SUV and correspondingly more for the other equipment), up to the (projected) $105,000 ceiling.

Tippiedog, ad-wrapping the car would *not* qualify the vehicle for business expenses, in and of itself...although pictures of such would help validate the claim that the car was used for business. (Although the ad-wrap itself would be deductible under advertising expenses.)

Note that unless the vehicle is parked at the business when not being driven, except in a few cases, that the car would not be considered eligible for the 100% rule. For instance, if you had one of these behemoths, and you owned a company, but you were not a direct service provider from the vehicle to the client, then driving the car to work and home would be considered commuting, and therefore not a business expense. Real world example: the time a real estate agent spends getting to a prospective client, driving the client around and returning the client to point of origin, are all tax deductible. However, her return trip home if she's officed somewhere (or an office is made available to her by her employer) would not be deductible, even if the car was wrapped in an ad.

For the record, I am not a CPA, I don't even play one on TV, but I've been a business owner for almost 2 decades, and have thus become quite familiar with tax law. :)
posted by dejah420 at 9:49 AM on April 25, 2005

As a tax CPA, I can tell you that before the loophole was tightened, more than half of my small business clients bought heavy SUVs for the tax savings alone. These were mostly not roofers, etc., who would rather have a truck, or something that was actually useful in their business. It was mostly doctors, lawyers, CPAs, real estate agents, etc. The kind of people who did make so much money that the tax savings was irresistible to them.

Under the tightened loophole, the tax savings is still pretty big, but so many people took advantage of the pre-tightening larger deductions that there weren't that many people left who could use the deductions anyway.

Also, you don't need to use the SUV (or any vehicle) 100% for business to get the deduction. You need to use it more than 50% for business in order to get most of the deduction. Also, a lot of clients will say that they use their vehicles 100% for business when they don't (I had a contractor who claimed that his Corvette was used only for business), but that's a separate issue.

(thomcatspike, the Internal Revenue Code, when the loophole was tightened, defined vehicles, including vans, as "heavy SUVs" if they have a gross loaded vehicle weight of more than 6,000 lbs. and if they meet certain other definitions.)

Allowing these huge deductions really is bad policy, and you can hardly blame people for wanting to take advantage of the deduction. If you bought a heavy SUV at the end of 2003 and financed it, you could have spent maybe $3,000 on the downpayment and saved perhaps $20,000 in taxes on your 2003 return. On the other hand, if you buy an expensive automobile, you get hit by very aggressive limitations on your depreciation. It's no wonder so many doctors are now driving giant SUVs.
posted by anapestic at 9:51 AM on April 25, 2005

Passenger vehicles qualify for the expensing where used more than 50% for business. Where used 100% for business, they could be expensed up to $102,000 ceiling. The 2004 Act puts a $25,000 per vehicle ceiling on expensing the cost of a “heavy” SUV or Hummer—that is, a passenger highway vehicle weighing more than 6,000 lbs unloaded gross weight and not more than 14,000 lbs gross weight.

Dejah, you're partly wrong about passenger vehicles. They don't qualify for §179 expensing and are subject to the luxury depreciation limits. These limits were increased somewhat by the new bonus depreciation rules, but they're still somewhat restrictive, especially in the second and later years that the car is in service.. Before the loophole was tightened, heavy SUVs could be expensed up to $102,000, but other passenger autos couldn't, and still can't.
posted by anapestic at 9:56 AM on April 25, 2005

Balisong writes " Only people making 200K+ would come close to that.
"Roofers make aprox. 25-40K a year if they are lucky."

er, a salaried roofer would only make 25-40k a year. A guy who owns a roofing business could easily end up with a tax liability of 50-60k. Remember that "tax liability" is based on gross income, not net!
posted by clevershark at 10:06 AM on April 25, 2005

Also, why would someone need a Porsche Cayenne or Mercedes (G or M-class) for business? Honestly, why pay so much more when a Ford Expedition or Chevrolet Trailblazer are more than capable?

Or, is it because that I'm not loaded with money that I don't realize that it's not about money, but the Porsche or Mercedes name?
posted by C17H19NO3 at 10:14 AM on April 25, 2005

Everyone is criticizing the people who take advantage of the letter, if not the spirit, of this tax benefit.

Fair enough, but I recall that when this law originally went into effect, it was considered a bone thrown primarily to the auto manufacturers, to support sales of high-profit SUVs, and only secondarily as a bone to the people who will take advantage of the tax benefits.
posted by tippiedog at 10:21 AM on April 25, 2005

Maybe, Clevershark.
I own my own tile setting business. Sole proprietor. I have had up to 5 people working under me on some jobs, but most are done by myself. A truly small business.
There is no way I could justify a 60-80K vehicle as a one year expense. This loophole is not designed for small businesses.
It is designed for doctors, lawyers, CEO's and others who can justify extravagance.
Maybe I'm just not a Go-getter, but I'd like to see some real tax help come my way.
Because this is a tax credit, you already have to have the cost of one of these vehicles laying around, not already sucked back into the business. I'm always amazed what my 1099's say I made for the previous years, and wonder why I can't afford anything better than a used pickup.
/whine
posted by Balisong at 10:27 AM on April 25, 2005

That whole article was very misleading. The tax credit applies to a class of vehicles - namely Light Trucks. Many small businesses need light trucks for transporting materials and tools. It just so happens that SUVs are considered Light Trucks.
The article (and most of the comments here) make it sound like big bad SUV owners are getting free gas courtesy of the taxpayer. The author even singles out the Porsche SUV to bolster his personal viewpoint.
Small businesses often get tax breaks and credits for expenses incurred as part of their business. That's a good thing...it keeps the economy rolling. If the fact that a vehicle classification loophole extending the credit to Porsche SUVs bothers you (and it does bother me), the logical recourse would be to lobby to amend the vehicle classifications, keeping the credit for the roofer's pickup, but ending it for the Porsche.
posted by rocket88 at 11:11 AM on April 25, 2005

It must feel great to pay sixty bucks for a fill-up at the gas station as well.
posted by docpops at 11:26 AM on April 25, 2005

feels better than having to go bankrupt when the hospital bill comes!
posted by matteo at 11:41 AM on April 25, 2005

I believe you can expense rather than depreciate vehicles under the luxury limit ($14,800 or so?), but if you go a dollar over the limit (yes this includes destination fees, etc...) you have to depreciate instead.

Hey, you can always narc people out to the IRS who use 100% business vehicles for personal use. I agree that the heavy vehicle exceptions are deplorable tax policy, as are the pollution exceptions. Both were originally designed to give a break to farmers I believe. It would have been a good idea to only allow these exceptions in rural areas.

I'm especially pissed when I see such vehicles used in neighborhoods where vehicles over 6000 pounds are technically illegal (most streets are not designed for heavy trucks). I know my own street has had the water main break at least once when a truck came down it. I've personally seen H2 owners park partially on the sidewalk and crack the concrete. That being said, it's hard to blame someone for making a decision that saves them personally tens of thousands in taxes.
posted by BrotherCaine at 12:04 PM on April 25, 2005

I've personally seen H2 owners park partially on the sidewalk and crack the concrete.

That is highly doubtful.
posted by Keith Talent at 12:19 PM on April 25, 2005

feels better than having to go bankrupt when the hospital bill comes!

It's a common misconception that SUVs are the safest vehicles. They're not.

posted by mullingitover at 12:53 PM on April 25, 2005

I looked for other explanations for the fractures myself, but there were no trees with root systems nearby, and the sidewalk, development and landscaping was less than five years old at the time. Additionally, there are no other cracks on that entire stretch, except where the H2 parked. It's not like it gave out an earsplitting crack and gaped in a wide fissure, it just has fine radiating fracture lines from where the front tire was. The sidewalk is perfectly usable at the moment, but I have no doubt it will have to be replaced sooner than it would have otherwise.

I was surprised myself, as my neighborhood has curbs that were probably poured 50+ years ago, and are still intact.
posted by BrotherCaine at 12:55 PM on April 25, 2005

Unfuckenbelieveable.

I do not have a car by choice, and it really galls me that I deal with the inconvenience of not having a car so's not to contribute to the mess that is the oil business only to have my tax dollars go to Joe Schmoe's SUV gas bill.
posted by Specklet at 1:04 PM on April 25, 2005

From link: "It's hard to think of a worse formula for wrecking the country."

Agreed. We need to find a better one.
posted by koeselitz at 1:09 PM on April 25, 2005

There is no way I could justify a 60-80K vehicle as a one year expense. This loophole is not designed for small businesses.

posted by Balisong

i'm a self employed drywall hanger, so i know where your coming from Balisong. some of us are either to poor, or to proud (for space on the entitled's lap ) to understand how a small business owner could purchase such an obvious toy . . . *changes gears in rant* . . .
*4 wheel drive with a press of a button* . . .

unless you have a business in a swamp, desert, cliff, mountain pass, or . . . other, you DO NOT NEED an suv, for your "soft little in city driving ass".

i see these soft people every day. i'm on my honda motorcycle on my way to the job, trying like hell not to be run over by a real estate agent, or doctor ,or some other "soft no need to be havin' suv driving som' bitch", and now instead of nature taking its toll on these idiots (by way of it being to expensive) the government is giving them a reason to drive this over priced pile of conspicuous consumption ?
fuck these idiots! they could use a good fucking.
posted by nola at 6:57 PM on April 25, 2005

Hey Nola!! Man! Hauling drywall on a motorcycle must really suck... (hehe)
posted by Balisong at 9:01 PM on April 25, 2005

it does !! . . . so i let 'wallboard' haul it for me ;)
posted by nola at 9:28 PM on April 25, 2005

wallboard brings it to the job with their nice new suvs equipped with a boom and everything. hell they can bring 10 sheets a load in their new canyonarrow . they get the house stocked in less than a week . . . its a sight. *winks*
posted by nola at 9:33 PM on April 25, 2005

I like how "paying less taxes" somehow transforms into "government buying you gas".

It's your money, people, not Uncle Sam's.
posted by trevyn at 1:30 AM on April 26, 2005