news.yahoo.com/s/ap/20060218/ap_on_bi_ge/suvs_tax_breaks
AP Tax Breaks Given on Gas-Guzzling SUVs By TIM MOLLOY, Associated Press Writer Sat Feb 18, 2:16 PM ET LOS ANGELES - New tax breaks are available to anyone who wants to help the environment by purchasing fuel-efficient hybrid vehicles. But if owners of small businesses really want to save money, they can get even bigger federal tax breaks by buying the largest gas-guzzling SUVs.
Click Here The disparity is drawing criticism from environmentalists and the Republican chairman of the Senate's tax-writing committee, who is working on a change. Dealers and owners who have benefited from the SUV tax incentive say it helps spur a key part of the economy -- auto-making -- and allows small business owners to purchase vehicles that improve their bottom line. Federal tax rules that took effect last month allow a credit of up to $3,150 for anyone buying a hybrid car. However, owners of small businesses who buy a Hummer, Ford Excursion or other SUV weighing more than 3 tons get a deduction of up to $25,000 -- depending on tax bracket -- if they use the vehicle exclusively for work. Once they subtract the $25,000 from the cost of their 3-ton SUV, small business owners can deduct the depreciation on the remaining amount. Someone who bought a $60,000 SUV, for example, can claim the remaining $35,000 over six years. No such luck for small business owners who buy cars weighing less than 3 tons. No matter how much the vehicles cost, they can claim just $15,535 in depreciation over six years and $1,675 each additional year. Deductions for depreciation on trucks and vans weighing less than 3 tons are slightly more generous.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, is working on a bill that would level the playing field between SUVs and hybrids. "It's inconsistent for the tax code to encourage business people to buy heavy SUVs and not alternative vehicles," said Grassley, whose committee has oversight of tax legislation. "As consumer demand for alternative energy products increases, it's important for the tax code to be consistent." A Grassley aide declined to describe the legislation in detail, saying more information will be released in coming weeks.
President Bush's State of the Union call for less reliance on oil. "The president is right that we're addicted to oil, so we should break the addiction by urging Americans to buy hybrids, not Hummers," Becker said. The Alliance of Automobile Manufacturers declined to comment beyond saying the group is satisfied with current tax policy. Nashville real estate agent Cindy Jasper said the deduction has boosted her small business. She uses two Hummer H2s to take clients to rugged farm and equestrian properties -- and the vehicles also help grab customers' attention. "You have to do something to be a little bit different." The tax breaks for large SUVs are rooted in long-standing deductions for small business purchases, including trucks and vans for farmers, contractors and others who need heavy vehicles. Trying to jump-start the economy after the terrorist attacks of Sept. However, lawyers, doctors and others also took advantage of the measure.
John Snow wrote in a 2004 letter that the Bush administration favored the deduction's "complete elimination" except when there was a legitimate business need for a large SUV. That same year, Congress reduced the deduction to $25,000. The IRS does not keep statistics on the number of people who took the SUV deduction, spokeswoman Nora Butler said.
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