Is the IRS fueling the trend toward ever larger sport/utilities (SUVs)?
Consider the following provision found in Section 280F(d)(5)(A) of the Internal Revenue Code: "The term 'passenger automobile' means any four-wheeled vehicle (i) which is manufactured primarily for use on public streets, roads and highways and (ii) which weighs 6,000 pounds (unloaded gross vehicle weight) or less. In the case of a truck or van, clause (ii) shall apply by substituting 'gross vehicle weight' for unloaded gross vehicle weight."
By that measure, the GMC-Chevrolet Suburban, Chevy Tahoe, GMC Yukon andBronco exceed the 6,000-lb. (2,700-kg) threshold.
That means they qualify for much more generous deductions and depreciation, says accountant Melvin H. Daskal of Sherman Oaks, CA. First, the large SUV qualifies as a "qualifying business property." That means the owner can deduct a maximum of $17,500 of its price the first year. Secondly, if the vehicle is used 80% of the time for business, there's an additional first-year, straight-line deduction equal to 10% of the difference between the tax basis (80% of the sales price) and the $17,500. In other words, the first-year tax deductions on a $30,000 vehicle weighing more than 6,000 lbs. would total $18,150 ($17,500 + $650).
By contrast, the first-year depreciation on a $30,000 luxury car would be a mere $3,060.
There's more, says Mr. Daskal. The same legal distinction means SUVs are exempt from the 10% luxury tax that applies to that portion of a luxury car price that exceeds $34,000.