This
diary entry inspired me to go back and look for
this article.
Since 1997, anyone deemed to be a small-business owner for tax purposes could write off some amount of equipment purchases each year, up to $18,000 worth that first year, up to $25,000 in 2003. Since 1984, the Internal Revenue Service, thinking more about Chevy Silverado pickups than Cadillac Escalades, has considered vehicles that weigh more than 6,000 pounds to be deductible business equipment.
When lawmakers began writing this year's $350 billion tax-cut plan, they looked for ways to help the economy by encouraging small businesses to invest in new equipment, which could include computers, rotary saws or photocopiers. Congress raised the maximum annual value of the deduction to $100,000, through 2005. At the time, environmentalists implored tax writers to disqualify SUVs, but lawmakers declined. With the top business tax rate at 35 percent, Washington effectively cut $18,900 from the price of a $54,000 Escalade, bringing its cost more in line with an Oldsmobile Aurora sedan.
The problem is this legislation creates obvious loopholes, which SUV dealerships are using to their advantage:
To get the full write-off, the vehicle is supposed to be used full time for business purposes. As long as it is used more than half the time for business purposes, its owner can deduct some of its purchase price - say, 75 percent for a Chevy Suburban used 75 percent of the time for business.
"For the rest of us mere mortals, it's just something else to be annoyed at," said Ric Edelman, chairman of Edelman Financial Services in Fairfax.
...The tax change's power stems from two concurrent forces: the size of the write-off, $100,000, and the metastasizing of passenger cars into behemoths. Six thousand pounds once seemed like a reasonable demarcation between passenger vehicle and business necessity. But now, three-ton luxury cars are becoming commonplace, and they do not have to be the obvious leviathans, such as five-ton Hummers and 8,600-pound Suburbans. Chevy Trailblazers, Lincoln Aviators, Land Rover Discoveries and trendy Volkswagen Touaregs just meet the limit.
The article suggests Congress is working to close that loophole, but that legislation has already been defeated.