A tax loophole that small business owners have increasingly used to finance the purchase of large SUVs is about to get dramatically larger, the Detroit News reported.
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Under a major tax package going through Congress, a deduction for small business equipment purchases – now capped at $US25,000 – is set to go up to as much as $100,000, the paper said.
The Detroit News said the business equipment deduction was included in a $350 billion tax-cut plan the Senate passed on Thursday and that the small-business provision has President Bush’s blessing, virtually assuring that the tax break would become law.
The newspaper said a growing number of small businesses are using the new equipment write-off to purchase luxury SUVs at a deep discount. Under current law, a small business owner can deduct $30,000 or more of an SUV purchase by combining equipment and accelerated depreciation breaks in the tax code.
If the deduction is raised, the Detroit News noted, a small business owner will be able to write off the entire cost of almost every vehicle on the market that the IRS defines as a truck – those having a gross vehicle weight of 6,000 pounds or more. Under the president’s plan, a Hummer H1 buyer could deduct nearly $89,000 of the $106,000 purchase price.
Under slightly differed congressional plans, the entire cost of the H1 – the most expensive, least fuel-efficient sport utility vehicle sold in the US – would be tax-deductable, the Detroit News said.
