The Financial Edge
Online Article
The Newsflash Regarding SUVs
Recently there has been a lot of media attention to what many people considered a tax loophole. Sport Utility Vehicles (SUVs) with a gross vehicle weight in excess of 6,000 GVW qualify for Section 179 and are excluded from luxury auto limits. In 2004, Section 179 allows for a first year write-off of an asset up to $102,000. All this will change the day after President Bush signs the American Jobs Creation Act of 2004, which is expected to be signed in the next few days. SUVs will be limited to a Section 179 deduction of $25,000. The move is in response to pressure to disallow a deduction that encourages taxpayers to purchase vehicles that some considered environmentally unfriendly. Additionally, the deduction is becoming costly to the government given the popularity of the SUVs, and the fact that more and more SUVs are meeting the minimum weight requirement.
For 2004, all is not lost. The SUV provision is not retroactive. Meaning, if you have already made a purchase of a qualifying SUV prior to the bill being signed you are in luck. Additionally, bonus depreciation, which allows an additional 50% first year write-off of new (not used) business asset, still applies to SUVs. Keep in mind, bonus depreciation is slated to expire on January 1, 2005.
A quick example of an SUV purchase made after the bill is signed would be: For a $70,000 SUV, about $52,000 could be written off in the first year for 2004. In 2005, without bonus depreciation, the first year write-off would be $34,000.
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